James Downey, a certified public accountant for Downey & Co. in Braintree, answered readers' tax questions about everything from deducting for theft to claiming dividends. Here's a transcript of the discussion.
James_Downey: Hello. My name is James Downey and am a CPA at Downey & Company, LLP. Thank you for joining me and thank you to Boston.com for setting up this interactive forum..
aaa__Guest_: I bought shares in 2007, it went up little bit and then 20% down and one off them paid dividend but i did not sold the shares and in 2007 oveall i lost money but i go 1099 saying i have earned dividend. even i lost money in stock in 2007 i still need to pay tex on dividend
James_Downey: Yes, you have earned income for the dividend in 2007. This will be included as income on your 2007 tax return. The loss on the stock will only be considered deductible after you have actually sold the stock.
Pete__Guest_: Hello fellow Bentlely grad! My wife and I welcomed our first child last spring and she had stopped working(she was working up to that point) since i'm now head of household, do i check off head of household or do i still fill married filing jointly?
James_Downey: Congratulations on your child. Your still file married jointly. However, your child is now considered a dependent and your are eligible for the child tax credit.
James_Downey: Go Falcons!
kimmberbee78__Guest_: should I file a tax amendment, I filed my 2007 taxes a little early and after I filed them the school I attened sent me a tax form for $1867.00, I already rcvd. a big refund with eic, for $3500-, would it increase it probably not affect me since I already got a refund.
James_Downey: It is difficult to know without seeing your tax return. Education expenses are deductible and in some cases are eligible for tax credits. You would likely receive an additional refund. You should prepare the return and determine if there is a difference in tax refund and file the amended return.
Jack__Guest_: I have an investment rental property besides the mortgage interest what I am allowed to deduct.?
James_Downey: You are allowed to deduct direct costs related to the property including, cleaning, maintenance, transportation costs, insurance, utility costs, etc. Additionally, you deduct depreciation expense based on the value of the dwelling over 29 years.
mikek__Guest_: i had personal use electronic equipment worth $2500 stolen from me this year, i itemize deductions, can i write this off?
James_Downey: Theft of property is considered a casualty loss. Treat this as a casualty loss and complete Form 4684.
jack_2__Guest_: I had two stock sales in 2007 (same company). The problem is calculating the cost basis. This is stock I've owned since 1997 while working for the company and from a DRIP after leaving the company (monthly deductions/purchase). I don't even know where to begin in calculating FIFO, cost basis, etc.
James_Downey: Unfortunately, the burden is on you to determine the cost basis of the stock. Try to determine the times of the stock purchases and you can determine historical cost on the company's website or other financial service. This should get you pretty close to the actual cost paid for the stock.
bob__Guest_: I received a 1099-DIV with box 1a Total ordinary dividends of $568 and box 2a Total capital gain distr. of $380 do i have to count this as income earned and add it to my total wages for tax due amount?
James_Downey: It is income earned. However, you do not include it as wages. The dividend is to be included on schedule B of your return and the capital gain is included on Schedule D of your tax return.
grenoble28: Hello - Fellow Bentley Grad as well. I own a home with my fiance. We are both on the mortgage and split the payment 50/50 but I write the check each month. Can I claim the full amount of interest and real estate taxes since I have the higher income which would result in a higher combined refund.
James_Downey: Unfortunately, you should split the amounts 50/50 on your tax returns. Although this does not get you the best outcome, it is the correct way to treat the deduction.
Al__Guest_: I lived and worked in MA from 1/07 to 9/30/07 then moved to RI, but still work in MA....which MA and RI forms do I use and do I pay taxes in both states? My tax filing s simple, use 1040EZ for Fed
James_Downey: You will need to fill out two state returns. You need to complete a part year resident tax return for both Mass. and RI.
donnar-l__Guest_: Hello, I was out of work for several months last year with a stroke. I received benefits from AFLAC a program I've been paying into for years. How do I account for this money?
James_Downey: If you have been paying the premiums on an after tax basis, then the income that you received is not taxable.
zags__Guest_: What is the tax law defination of "middle class" or-what is the cut off salary amount for "middle class tax cuts"? Hope that makes sense...
James_Downey: There is no definition. Just politicians trying to appeal to as many people as they can. Last I heard, married couples earning under $125K would receive the majority of benefits under the proposed stimulus package. Considerably less for single filers.
NancyS__Guest_: My husband was laid off, and he rolled his company 401k into a fund in Vanguard. They mailed the check to our home, and was forwarded it to Vanguard. He received a 1099. How do we handle this on out tax return? He should not have gotten a 1099, nor should we pay tax on the rollover.
James_Downey: You should call Vanguard to confirm everything was transferred properly. If the transfer was handled appropriately (sounds like it was), you will treat it as non-taxable pension income on your tax return.
mikek__Guest_: If in grenoble's question only he was on the mortgage but him and his fiance were both on the deed, how would your answer be different?
James_Downey: The fact that his fiance pays for 50% of the interest is the reason his fiance gets the deduction. If she is not on the mortgage, the IRS would not likely find out the discrepency, but it is still not the appropriate way to claim the interest deduction.
tp18ma__Guest_: I replaced my boiler last year in my single family home, I was hoping to get more than $150.00 engery credit. Is that the only credit out there ?
James_Downey: Sorry, that is the credit.
James_Downey: You also receive $300 if you replaced hot water heater.
Pete_3__Guest_: My wife worked (for a short time) at a restaurant and got 2 paycheck (~$500). We have not received the W2. What is our repsonsibility to "hunt it down"?
James_Downey: Even if you do not receive the W-2, you need to include this as income as well as the amount of tax withholdings on your tax return. You should probably call the restaurant and request the W-2. It will make your life easier this way (in case the restaurant reports figures that are different than yours). Furthermore, depending on the withholdings, you may get a larger refund.
xman__Guest_: I'm a you profession, making a pretty good salary -- just curious if I should be itemizing my deduction. As I understand it, if I don't have at least $5,000 in itemized deductions I should take the standard deduction instead of itemizing, is that correct? As an employee making a good salary, who rents, should I be able to come up with $5,000 in deductions or not? Thanks.
James_Downey: The standard deduction for single persons is $5350 for 2007. You would only itemize if your deductions are greater than $5350. Itemizable deductions for someone that rents typically include their state income taxes, charitable contributions, and unreimbursed business expenses. (this is not all, but just the typical ones for a renter.)
icedaddyvi__Guest_: My wife and I were married on December 29th 2007. I am sure that the priest did not send in the marriage certificate until after January 1st. Do we have to file as married because of the wedding date, or can we file as single because the certificate was not recorded until after January 1?
James_Downey: It is based on when you are legally married. If you are not married in the eyes of the state until after Jan 1, then you can probably each file single for 2007 then file married in 2008.
Jack__Guest_: My wife and I work from home. We both use portions of our home for regular and exclusive business purposes. Are we able to take a home office deduction because of this?
James_Downey: Yes, if part of your home is used exclusively for business purposes, then it can be considered a home office deduction.
betnal919__Guest_: For 8 years I have been paying off a tax bill of 18K, due to leaving a company after having taken a loan against the 401K. Is there anyplace on my tax return where I can get credit for the amount paid every year 3,600)? To date I have paid back 24K and still have 2K to go?
James_Downey: Unfortunately, there is no deduction for this. The interest is not deductible either as it is considered personal.
dr__Guest_: Can I deduct moving expenses? I moved to lessen my 3 1/2 hour commute each day to 1 hour each day.
James_Downey: Moving expenses would only be deductible if you changed your principal place of work (changed jobs or your jobs location changed). It does not appear that you did. So it does not appear that these moving expenses would be deductible.
tp18ma__Guest_: I also replaced my water heater about two years back but took no dedcutions at the time. Could I take the deduction now or would I file an amended return for that year ?
James_Downey: You would need to file an amended return.
mikek__Guest_: Where do closing costs get deducted on your taxes? And whats deductable of the costs?
James_Downey: The only deductible costs for a closing are points paid on a mortgage as well as any real estate taxes that you may have paid to previous owner as part of the settlement. The rest can be included in the basis of your home.
RobO__Guest_: I never get receipts for donated clothing etc. Can I no longer declare any of it? It never totals more than $500 per year.
James_Downey: You should follow-up with the charity and request receipts. If you do not have receipts and are audited by the IRS, they will not allow a deduction for the donated goods.
bhill__Guest_: Hi James, not necessarily a question on deductions. In the past year my wife and I got married and moved to a new state. Will an online tax tool like turbo tax be able to find the appropriate deductions and help us file taxes for this year?
James_Downey: It should be able to help you. Just so you know, the software companies usually only allow you to use one the software to prepare one state tax return, so you may have to pay 2X for the state software.
James_Downey: That is all the time I have for today. Thank you for your questions and participating in this forum. Good luck!!