Ask MetaFilter questions tagged with tax

Delinquent expat tax situation, will I need an enrolled agent?

tacocat — Mon, 20 May 2013 23:50:48 -0800

I've had a difficult time figuring out my tax situation since I moved from the US and now I'm trying to get everything settled. I'm behind a few years and need someone to talk directly with the IRS on my behalf. Will I need an enrolled agent? A tax attorney? Both? Neither? Arg it's so confusing! I've received recommendations from friends for CPAs, but they have either been unclear about their capabilities (experience with expat situations) or just completely non-responsive where they don't return my initial calls. Now I'm on the hunt for a tax expert to help me out of my mess, but I'm not sure where to look or who to look for.

I would like to avoid paying a huge amount for a tax attorney if they aren't necessary, but at the same time I would like to have someone that can represent me if needed. Then there's the enrolled agent, I'm not clear on what benefits they even have. I'm losing sleep thinking about the IRS so I would like to have someone I can rely on to do things right. Would it be better to approach a firm rather than an individual?

Finally, is there a good source online to find accountants? All their websites look so shady for some reason.

Legal and Tax Ramifications of Paying Subcontractors

Mister_A — Fri, 17 May 2013 08:17:43 -0800

I've been doing a fair bit of freelance work, and it's to the point now that I have to sub out certain tasks that are outside my area of expertise. I don't want to make my clients cut multiple checks if I can avoid it–want them to just deal with me to keep it simple and neat. However, I do not want to be on the hook for income that is actually going to a sub. What to do? Details:
I do not own a corporation or partnership or anything like that.
I live in Delaware County, PA (10 miles from Philadelphia, 10 miles from Delaware).
Most of my freelance business is in advertising; some in marketing consulting.
I am unlikely to be able to afford an attorney.
I have a pretty good friend who is an accountant, I am asking him as he provides services to small businesses.
I am tight with my subcontractors–known them for a long time, work well together, and def. want to pay them in a timely and fair way.
I am willing to pay fees and do paperwork to form a legal entity, but must keep it within reason.

Thanks!

Should I Re-Mail US IRS and Treasury Dept Tax Info?

mbarryf — Thu, 02 May 2013 05:29:28 -0800

I live in (and am a citizen of) Canada, and have recently mailed important tax information to the US IRS and Treasury Department via the regular Canada post. Should I re-mail that information to ensure that it made it to the proper destinations? I plan to include a covering note telling the recipients that this is an exact duplicate of the materials I sent before, and if their records show it was received earlier, to securely destroy this new copy. The reason, I will explain, is fear that the post offices (Canadian and US) might have lost the originals. (There are no original receipts with the original items, only forms that I filled out.)

Questions: Will this re-sending cause me any problems (currently, I have absolutely no problems with the US IRS or Treasury Departments)? Would it be a good idea to re-mail this material just to be sure it gets to them?

Can I effectively protest the actions of my state tax authority?

Luke Skywalker — Tue, 30 Apr 2013 08:41:33 -0800

I'm seeing reporting that bothers me that my state tax authority is targeting artists for auditing based on what sounds like some specious assertions regarding whether their business models and expenses are appropriate. I realized I don't know what I should do to formally protest these actions. I'll start by saying the reporting I've seen has a clear bias in favor of the artists in question and I haven't seen first-hand confirmation of the assertions that this is part of a growing effort on the part of the tax authority to target working artists and not just an isolated incident. I will continue researching this on my own.

What I'm really interested in is, assuming for arguments sake that these actions are a valid target of protest, what should I do? I can email the general contact for the authority, I can do what I can to spread the word, but these seem pretty weak. When I write my governor or representatives I know at least that they are getting feedback from a voter who has a direct if small impact on their ability to retain their position. Who's in charge of the tax(wo)man?

I understand that as an average voter and citizen there is nothing I can do that will have a particularly large impact. I'm just curious if anyone has input on what the most effective way to register protest about these actions would be.

and I thought we were done with tax questions for a while

secretdawn — Tue, 23 Apr 2013 17:57:53 -0800

My employer paid me separate checks for my regular hours and overtime hours, and the overtime was not taxed. Is this cool? So I got a little raise last week. With this I was switched from hourly to salary, and I'm still non-exempt. I'm in California.

I rarely work overtime. I actually get to leave significantly early almost once a week which is why this salary thing is kinda nice. But of course I worked some overtime my first week under this new pay. The part I'm confused about is their choice to pay me separately for the regular hours and the overtime hours.

My check for the regular hours will be directly deposited to my account from our payroll company on Friday as usual, but they already cut me a separate check for the overtime. This overtime pay had no deductions.

Is this right? Shouldn't there still be deductions on my overtime pay? If not, is there anything I need to be tracking on my own? Will I owe on that later?

I'm not sure if this will be reported differently when tax time comes around again, and I don't really want to have to deal with weird tax things.

Calculating California state income tax withholding

Anonymous — Mon, 15 Apr 2013 20:38:27 -0800

I feel like this should be really easy, but I'm coming up with a non-sensical result. I am considering taking a job that would involve a pay cut (long story, I promise it's worth it). I am trying to calculate what my actual paycheck would be. I'm using the paycheck calculator at Paycheckcity.com to figure this out. But the number it's giving me for California state income tax doesn't seem right. I am currently payed a base salary of about $150k/yr. The new job pays a base of about $125k/yr. I am married filing jointly with no exemptions, and paid biweekly. The calculator on paycheckcity gives me a withholding rate that comes to 8.16% of gross pay on the 150k, but only 6.2% of gross pay on the 125k. I don't see how this could possibly be right. I confirmed that all the filing status, etc. is the same on both. I looked for other paycheck calculators online, but almost all of them end up being "powered by paycheckcity."

I know how to find the actual tax rates, but those need to be calculated against AGI, which is a little bit hard to derive in a paycheck context (lots of other incomes and deductions involved, etc.). What I *want* to find is an official explanation of the formula that is supposed to be used in calculating the withholding, so I can figure out where/if this is going wrong. I can't imagine that the pay difference I'm looking at would bump my tax rate down that much.

Filing Federal Income Taxes with no Income (Partnered Dependency Issue)

MCMikeNamara — Mon, 15 Apr 2013 10:20:05 -0800

My partner has not worked at all in 2012. He did not work much in 2011. (He had some income in January.) We are not married or civilly unioned or anything “official.” However, for the last two years, he has qualified as my dependent and I have filed accordingly. Last year, this felt tricky because we were concerned about where the income cut-off was, and he filed as usual, but reporting himself as my dependent. This year did not feel tricky at all because he had no income at all (no employment, unemployment, no disability, nothing), so as soon as I got my W-2, I filed and got my refund and put it out of my mind. Until this morning as we headed out the door to work/doctor's appointment, when he asked “wait, when you did your taxes while I was in the hospital, did you file mine?” Oops. Cursory Google searching leads me to believe that nothing needs to be done -- and some sites even suggesting to definitely not file, but I am concerned that with him as my dependent, we need to have something on record (other than me putting his SSN on my form) that he had no income/qualified as my dependent.

I can print out a form and fill it in with a bunch of zeroes today if I should, but this seems silly. I am sure the real answer is somewhere online, but I’ve been able to find nothing I trust.

(I am hoping I have enough goodwill as a community member to not get too much grief about the timing of this question and am functioning on about 3 hours of sleep and swamped at work, so my defenses that would typically stop me from doing this here are down. You are not my accountant or my tax preparer, etc. We’re in Illinois if it matters. Thanks in advance.)

Freelancers: What are your tips to make it easy to do expenses/taxes?

ManInSuit — Thu, 11 Apr 2013 15:19:40 -0800

I work as a freelancer, and have done so for many years. Which means I need to track all my expenses for tax time. I'd like to spend as little time as possible on this, both week-to-week, and at the end of the year. I'm in Canada, if that affects things. I do a bunch of different freelance work - facilitation, consulting, writing. At the end of the tax year I total up all my expenses in various categories, and meet with a tax preparer, who I've worked with for a few years, and helps me put all those numbers into a return.

I run up millions of little expenses throughout the year - taxis, reference books, business meals, etc....

Increasingly, I find this process mind-numbingly boring. I used to do this using paper receipts. Then I moved to Quicken, and tried to do pretty much all my expenses via credit card or debit card, which helped. But now the weekly task of syncing everything in Quicken feels like a big hassle, and I end up not doing it. (I have, for a number of reasons, 6 bank accounts and 3 credit cards, and syncing all of them is a drag...) I'm thinking of using mint.com, which I gather is simpler.

I'd love any tips people have on how to make the process of tracking your expenses for taxes as easy and headache-free as possible.

I'm in Canada, if that affects things. (Among other things: It means our version of Quicken lacks the some of the automatic sync features that I gather exist in the US version....)

Thanks!!

Tax Question: Writing Off Startup Costs In the First Year of Business

The ____ of Justice — Tue, 09 Apr 2013 14:13:02 -0800

Question about whether it's worth it to write off approx. $2500 in startup costs for a small business that generated no income in 2012, and whether it's worth it to do so. You are not my CPA, but any general advice would be helpful. I started a business in 2012 that required some computer equipment, additional office supplies, and some work with a contractor (approximately $1300 for the computer equipment, another $1200 for contractor services).

There was no income for 2012. The business is generating income now (2013).

1) Is it worth it for me to try and write off the $2500 in startup expenses for U.S. federal income taxes? From my understanding, I would have to amortize this out over a period of several years. I feel like this would make such a small dent in my overall taxes it may not be worth the time spent filling out forms to amortize the equipment.

2) If I don't write off startup expenses now, will I be able to write off them off for 2013 taxes even though these things were purchased in 2012?

Any advice appreciated, thanks in advance.

Is an org. legally required to generate 1099 forms?

Anonymous — Mon, 01 Apr 2013 14:44:08 -0800

Is the non-profit I work for legally required to generate 1099 forms for all of the individuals who receive stipends from this org. and have filled out W9 forms (technically "independent contractors")? I am trying to help the people in our job training program file their taxes but am running into some opacity in the staff/accountant side of our organization in getting the info these folks need.

From what I've read, if a business or non-profit pays someone $ as an independent contractor and has that employee fill out a W-9 form with this taxpayer id number as part of the employment process, when reporting taxes for the year the business or non-profit should be generating 1099 forms: one copy for the IRS and one for the individual. Is this accurate?

How strict is the requirement that this 1099 be provided to the individual? I'm basically trying to figure out how likely it is that these 1099s have been generated and simply lost in the shuffle, making it potentially easier for me to keep pushing the accountant to reissue them. Many people in the program have non-permanent addresses or may have moved and not updated their address.

Tax Q: Gettin' divorced, can't claim deductions.

Anonymous — Thu, 28 Mar 2013 12:16:32 -0800

Here's the rub: In February on 2012, I decided to end my marriage. Because I was dead broke, we simply moved apart, split the bank account in two and went our separate ways with the understanding that we'd make a move to formally divorce in the next year. We did not get a legal separation. That divorce is now pending. My soon-to-be-ex-wife filed her taxes 'Married, Filing Separately'. This causing me all kind of tax havoc, including a bill I have no way of paying. More inside... 2012 was a big year. I made $6412, 1099 style. I became a graduate student. I spent $30k of Uncle Sam's money on tuition.

All told, I owe the government $789. I do not have $789. I have $79. But between the cost of getting divorced and tuition, I figured I'd have some nice deductions on my taxes. Instead, because I have to file 'Married, filing separately', I can't claim any of those educational deductions and the guy who make $6412 bucks last year and has no income is stuck with a $789 tax bill.

Is there any way around this? Tips or tricks from tax gurus? Or am I just stuck in a trap of my own making?

Do Free File confirmation e-mails contain sensitive information?

millions — Sun, 24 Mar 2013 14:10:03 -0800

Do the confirmation e-mails for e-filing federal tax returns with Free File Fillable Forms contain sensitive information? I just filed my taxes with the Free File Fillable Forms website, but I used the wrong e-mail: basically, without thinking I used an address that was a mix of my work e-mail and my personal e-mail. Unfortunately, it is an existing e-mail, so a stranger has access to whatever is contained in that e-mail.

Now I'm freaking out a bit. I'm worried that I the Free File website might have sent out information that someone might use to access my tax information or, indirectly, even steal my identity. I wouldn't guess that a confirmation e-mail would contain sensitive information, but you never know. If anyone used free fillable forms to file their return, describing what the confirmation e-mail contains (or even a print-screen image if there's nothing sensitive to hide) would be a huge help.

Do I need a new W2 and other tax questions

Anonymous — Sat, 23 Mar 2013 21:34:50 -0800

I lived in two states last year, but apparently only paid taxes in one. Now what? I telework and I worked for the same company for all of 2012. I lived in DC from Jan-September and moved to another state and took residency of that state for October-December (through present day).

HOWEVER apparently my company didn't change this in their system/didn't acknowledge my change of state form/I probably messed up too and the only state I paid taxes for was DC and I paid them for all of 2012. I have paid zero taxes for my new state for 2012.

What do I do now? Do I ask my employer for an amended W2? Can I just go to H&R Block and have their Tax Professionals fix this for me? Am I going to tax prison or is this not as bad as I think it is?

Am I right to assume that I will get a refund from DC and will obviously owe taxes in new state?

I know YANML or CPA, but I'd appreciate any advice. Googling didn't do much for me.

What's the sense in the marriage tax penalty?

drpynchon — Sat, 23 Mar 2013 10:49:20 -0800

Can anyone explain the politics behind the marriage tax penalty? As a professional who makes good money with a long-term significant other in the same boat, I came to realize that under the current tax system we might stand to lose over $250k over our careers in federal income taxes if we got married as compared to filing single. I'm all for progressive taxation, but am having a hard time making sense of this marriage penalty. What is the political argument in favor of this?

Did you find mistakes or problems with Turbotax?

CaptainCaseous — Tue, 19 Mar 2013 07:05:48 -0800

Hi AskMefi. Did my taxes as I always do withTurbotax Deluxe. They came out higher than I expected. I'm considering getting a professional to see if I'm making errors but wanted to see if anyone has had a similar experience where they found that turbotax left them with unaccounted or unexpected payments. Any experiences like this? Thanks.

Can I rent an apartment in NYC with this on the credit report?

droplet — Thu, 28 Feb 2013 09:00:34 -0800

I've paid my back taxes for New York State as of last year, but the judgment is still on my credit reports, although marked "paid". This is my only ding. Will landlords refuse to rent to me anyway? I live in NYC with a roommate/owner whose family wants to fix up and sell the place, so I have to move out by end of May. I've lived in my current flat for 11 years and paid my rent on time, which they will provide a letter attesting to.

I applied to live in a working-class housing complex in the Bronx a couple of weeks ago, and they disqualified me for bad credit, so I checked my credit out. The scores themselves weren't terrible; I have one in the upper 600s from one rating company and in the mid-700s from the other two. The issue is from when I was on UI a few years ago. I didn't have taxes taken out then, as the maximum benefit for New York State is so low, to reduce it further would've had me on the streets.

Once I got a job again, enough time had passed that the State garnished my checks until the back taxes were paid off. The judgment is on my credit report, and I sent all 3 agencies the note from the State saying that the judgment had been satisfied.

How do I mitigate this so that I can get an apartment? Are all NYC/Yonkers/NJ landlords going to turn me down? I'm at an age now where having a roommate is a seriously unappealing prospect, but if I had to do that again, would this lien business keep me from being on a legal lease? What are my options under these circumstances?

Why can't I just be rich? :(

Help me not owe a bazillion dollars in taxes next year.

Sara C. — Wed, 27 Feb 2013 22:10:36 -0800

Somewhat unexpectedly, I find myself working as a full time freelancer. Help me anticipate the tax situation. I have done the freelance income song and dance before, but up until now it's been an occasionally significant side gig (less than 10% of my total income). Now it looks like the vast majority of my 2013 income is going to be of the 1099-able kind.

How do I manage this without just sort of sweeping it under the rug and discovering next April that I owe thousands of dollars in taxes? I'm thinking of opening a separate savings account just for tax withholding. Is that the right thing to do? How much should I set aside? Should I do quarterly estimated taxes or pay in advance somehow? What's best practices here?

Luckily most of my income is coming from one client, who I will be invoicing regularly, and who pays promptly, so I probably don't need to deal with spreadsheets and shaking people down for money. I mainly just need to figure out how to make it right with the feds.

It doesn't look like I'm going to be making more money, on the whole, than I did in previous years -- if anything, I'm taking a pay cut. It's just that something like 75% of it is going to come as freelance income with no taxes withheld.

So far I'm doing fine with other freelancer issues like time management, workspace, routine, etc. and am not too interested in advice about health insurance. My main concern right now is financial.

Do I need a CPA/CA to prepare my taxes?

Babushka — Sun, 17 Feb 2013 13:25:08 -0800

I moved back to Canada in November 2012 after living in the US for the past five years. Last year I had a CPA prepare my 2011 US and Canada returns and was shocked when I was billed $2,200 for what I see as a relatively simple tax situation. (W2, 1099-INT from the bank, statements of 401K and RRSP contributions and charitable donations) I still haven't recovered from paying so much last year and well, it's that time of year again. What are my options of having my US and Canadian returns prepared for a more reasonable amount? Can I get a US tax preparer in the States and a different one in Canada or is there some sort of connection that's required? Can I do the taxes myself using a TurboTax package from the US and one from Canada? I have my 2011 returns to use as a guide. I'm scared I'll miss something or do something wrong, but it's awfully tempting under the circumstances.

Paid a friend to help me with a project. He wants a W2. Really?

Anonymousness — Wed, 30 Jan 2013 11:29:02 -0800

A friend in the same field as me, who was underemployed last year, helped me on a project last year. Over the whole year it was a total of 32 hours (I paid him at $50/hr). Now he's asking for a W2. I think it's pretty clear that he was not an employee (W2), but rather an independent contractor (1099). Aside from inventing a time machine to go back and clarify the terms (which I didn't think would be a problem, considering our friendship), what should I do here? What's at stake?

Help! File for me, s'l vous plais!

i_wear_boots — Thu, 24 Jan 2013 21:13:38 -0800

Looking for a referral for a tax preparer for personal and small creative business. I am located in Los Angeles. My partner needs a tax preparer for personal taxes and I need one for my small creative business. Would be so very helpful to find someone we can both use. Many thanks in advance!

Missed 1099 form. How much trouble could I get in?

Anonymous — Tue, 08 Jan 2013 08:27:17 -0800

Missed 1099 form. How much trouble could I get in? (You are not my tax lawyer. Understood but seeking advice) Background: I am a student who works part-time, and my annual income is below the federal tax rate. Although not necessary, my parents insisted I file a tax return for 2011, which they helped me submit to the IRS before last year's deadline. Recently going through old paperwork from the last year (and being extremely unorganized), I realized I forgot to include the amount from a 1099-INT form I received last year; $125 as a promotion for opening a new bank account. As of now, I have not been contacted about the IRS for missing this form or reporting incorrect income amounts. After doing research it appears I may be able to file an amended return, but I'm unclear on whether I will be penalized for not reporting this sooner. Given my circumstances and the fact that even with the $125 I would not qualify for federal taxes, I'm unsure if it's better to try to amend the return at this point; I've heard from some the IRS automatically matches up 1099 forms with the amount you report, and others who claim that in my situation its unnecessary to report it and that if I do I risk the immediate penalty. The latter's argument is that if I was going to hear from the IRS about this, I would have heard already and they simply neglected to notice this error on my part. Please let me know what you think my best course of action is and if further information would be helpful. Thank you!

What's the best place to live on a low budget given a life-consuming job in Manhattan near Madison Square Park? And how low can I go both before and after unintelligible-but-critically-important-tax-stuff?

ch3cooh — Sun, 06 Jan 2013 22:50:27 -0800

What's the best place to live on a low budget given a life-consuming job in Manhattan near Madison Square Park? And how low can I go both before and after unintelligible-but-critically-important-tax-stuff? I've lived happily in Boston for two years on $300/month for all expenses beyond rent/utilities/internet. I love to cook, I bake bread, I bike everywhere, and most of the things I do for entertainment are cheep if not free. I really can't see ever spending more than $500/month on food and entertainment. So, I'd ideally like a nice kitchen attached to a shoebox containing a bed, a toilet, and a shower; an 8 minute walk through a garden full of sunflowers from my place of work. That said, I'm actually not married to living in Manhattan; however, a fast commute (ideally less than or around 30 min, certainly less than an hour) is definitely one of my highest priorities.

My prospective job in NY is one that I'm passionate about, but it's going to pay pretty poorly. Actually, the first prong of my question is "At what salary cut off should I turn down (or threaten to reject the offer if the salary isn't higher) the job? I don't care about 'what my time is worth' -- I mean this first question in terms of needing to know a minimum estimate for what I might live comfortably on, either living in or commuting a reasonable distance into the Manhattan area. Also, I honestly don't understand the tax system in NY, so please answer this question with 2 numbers: (1) how much money I'll actually get per month?, and (2) how much the job offer salary would need to be in order to result in that monthly paycheck?

My second question is then, where and how are the best places to look for housing given this circumstance? Where in terms of areas of NY, and how in terms of good sites to use to track down specific housing opportunities.

Any and all help/suggestions/insight appreciated. :)
And thank you so much!

Should we file jointly or individually?

arnicae — Sat, 15 Dec 2012 14:49:45 -0800

Mr. Arnicae and I are married, but haven't filed our (U.S.) taxes jointly before. We're trying to figure out how to decide if it would be financially advantageous to file jointly, and what the negatives or positives would be. Complicating factors:
-I make about 1.5 times what he does
-Our combined pre-tax salary is a bit over 100k, mostly w-2 but he has a fair amount of 1099 and misc income to declare
-We work in two different states
-We have no kids, and this year will have no deductions for elder support
-We rent our apartments

We generally do our taxes on TurboTax, so if the answer is "Go see an accountant", we can do that, but we weren't sure if there was a obvious choice here.

Neither of us feels too strongly about this - all other things being equal, we'd like to do whatever would save us the most time and money.

Thanks!

How common are discontinuous tax rates? And why would any nation have them?

jackbishop — Thu, 06 Dec 2012 13:38:37 -0800

I had previously thought nonflat taxes were all marginal, but to my surprise the UK Stamp Duty Land Tax doesn't use marginal rates at all. Are there other taxes like this? And why would a nation implement taxes this way? Marginally-implemented tax rates are widely misunderstood but seem to be the most common way to implement nonflat taxes. I teach mathematics, and have for years used the construction of income tax as a peicewise linear function to illustrate both continuity as a concept and as a desirable property for taxes (since you don't want to create perverse incentives to fall on one or the other side of an otherwise meaningless line). Since I took it as axiomatic that this was a good thing, I was shocked to learn that the UK's land transfer tax doesn't use marginal rates at all, and just has sharp discontinuities at £125,000, £250,000, £500,000, £1,000,000, and £2,000,000. This apparently affects real estate prices in the UK in the way you might expect, with prices piling up on the lower side of these lines. So, seeing as how this has been an element of my teaching, I have two big questions about this practice:

* Is it used anywhere other than in this one particular UK tax? I'd really never heard of any modern nation doing this.

* Is there a particular goal it seeks to achieve -- e.g. does the government of the United Kingdom have some sort of compelling interest in disincentivizing particular real-estate prices?

Want to sell my paintings - what to do?

Tullyogallaghan — Thu, 22 Nov 2012 07:38:29 -0800

I would like to begin to sell my paintings at local art fairs and online sites such as Etsy, $25-100.00 price range. Do I really need to set up an LLC or sole proprietorship, get a tax number and whatever else just to sell a painting or two (if I'm lucky?) Thanks. P.S. I live in Illinois.