Steve Elliott, a senior tax associate at Janover Rubinroit in Garden City, N.Y., took readers' questions about everything from deducting student loan interest to handling capital gains. Here's a transcript of the discussion.
Steve_Elliott: Good morning and welcome to another edition of Ask A CPA "live" on www.boston.com. I'll be here to answer your questions until 12:00. Let's get started.
Shallimar__Guest_: I was forced to use money from my credit card to pay health insurance.Is this deductible on Sch. A as a medical expense?
Steve_Elliott: Shallimar - Great question. YES, as long as the charges were done during 2007, a credit card charge for medical would certainly qualify.
ocnpnt__Guest_: Hi- I'm a run-of-the-mill guy with a run-of-the-mill paycheck, though I own a condo and rent it. Because I live in Washington, DC, I had to become a Sole Proprietor to rent the apartment. Can I still file as an individual but then fill out some additional form to file with my 1040 to cover the rental income, or do I have to file for my personal income separately from my rental income? Thanks, Dave, Washington, DC
Steve_Elliott: Dave - You would use Schedule E (Page 1) to report your rental income and related expenses. The net figure would flow to your form 1040. If there are losses, then the losses may be limited depending on your income limit. Losses would carryforward. Consider using a CPA to better assist you in capturing all related expenses.
Subhash__Guest_: My brokerage firm reports the total amount of the short term capital gains from the Mutual funds on the form 1099-DIV, Column 1a. This amount is supposed to be reported on the Schedule B. But, I would like to know if I can report this amount instead on the Schedule D, because I have carryover losses from previous years? If yes, then what is procedure that I should follow? Thanks.
Steve_Elliott: Thanks for your question Subhash - The brokerage firm is correctly reporting these items and they would be shown as dividends on schedule B instead of on Schedule D.
Brian__Guest_: Steve, I have a question regarding filing requirements. My seventeen year-old daughter had three income sources in 2007, with total gross income of about $4,500. The problem I see is that one summer job, at the YMCA, was treated as nonemployment income, and the income ( about $900) was reported on 1099-Misc. I think she falls below the normal threshold that would require her to file a tax return but I am concerned that the 1099-misc changes the equation. I appreciate your help.
Steve_Elliott: Brian - A 17 year old (or any minor child) would need to file a return with income in excess of $850. $850 is the maximum "free" amount. Her tax rate would tie to yours as she is under 18. The 1099 Misc. would first be reported on a Schedule C for her and you can deduct related expenses of travel or out of pocket costs. Consider using a CPA to best assist you in getting her tax return correct.
lee__Guest_: For single owner LLC, must the self-employment tax, SE tax be paid quarterly or annually using 1040 SE form?
Steve_Elliott: Dear Lee - the payment of the self-employment tax should be paid quarterly using 1040ES forms though many people by pass the quarterly in favor of annual, though there may be penalties for tax underpayments.
KJ__Guest_: i am on SSDI, and i don't have to file a tax return because my income is less than $25,000/year. however, i received an $8,000 inheritance that came from my father's IRA. and i want to file a return so i can get the stimulus payment. do i have to file a return and claim this inheritance? thanks.
Steve_Elliott: Dear KJ - thanks for your question. You should file a return for sure. You should have received a 1099-R form for the IRA amount of $8,000 and this is taxed to you both Federal and State. There would be no 10% penalty for the IRA as you received this through the estate.
taxpayer48__Guest_: How about a Mass. state income tax question?
Steve_Elliott: A MA question is fine - what is it?
Victim_of_AMT__Guest_: Steve, I am subject to paying high real estate taxes and high state taxes that puts me automatically into AMT. Would you be able to suggest any alternatives for me to consider to avoid. I contribute the maximum to my 401k, am single and 52. My employer has a deferred compensation plan but I am not eligible to join. I somewhat feel unhappy because I live a modest life and as a result have some savings and know pay this additional tax. Thank you.
Steve_Elliott: Dear AMT Victim - Welcome to the AMT CLUB!! More people then you know belong :( There is not much you can do from the facts you gave me. Consider using a CPA to plan with you to better assist you. Additional ordinary income could help offset this.
Jen__Guest_: I received several hundred dollars in dividends from a stock I still own. It was reported to me as both ordinary dividents and qualifying dividends. I think there's a separate worksheet, if not a whole separate form, for qualifitying dividends. Do I have to fill that out or can I just report tham as ordinary dividends? If I report them as qualifying, will I pay more or less tax on them?
Steve_Elliott: Hi Jen - thanks for your question. Qualifying dividends mean you pay a 15% rate on those dividends vs. your ordinary tax rates. A tax software program will figure this out if you enter it in correctly. There is a table in your 1040 tax booklet also.
Buddy__Guest_: If you are divorcing and filing as "married filing separately" can you divide up interest credit on your mortgage for the year or does the credit all go to one person or the other?
Steve_Elliott: Dear Buddy - have you considered filing jointly? It will save one or both of you lots of taxes. Also, do you have children so if you do file separate you can file as head of household possibly? Bottom line though is that if you are both on the mortgage you can agree to split up the interest if you prefer to do that.
Bean_Counter__Guest_: Last year's income was extremely low due to my employer's closing of the business, but I was still hoping to contribute to my IRA. Should I be concerned that the IRS may view this as suspicious by contributing to my IRA when not even making the poverty line?
Steve_Elliott: Not to worry Bean counter! If you have other funds to contribute to your IRA and you meet the income limits for earned income then by all means add to it :)
chins__Guest_: Steve -- I bought a condo last March. First time filing taxes with property involved. Is it ok to do online taxes using one of the well known online softwares? Or, is it better to get professional help to file taxes this year? If I use online software, will I be misisng something significant? thanks
Steve_Elliott: Dear Chins - congrats on your condo purchase! The softwares should be ok, though you may end up missing an interest or tax deduction for the condo.
Subhash__Guest_: Followup to my question: Do I have the option to report this amount on the Schedule D because I have carryover losses that would offset any short term capital gains from the mutual funds. In other words, that would reduce my total tax liability. Thanks.
Steve_Elliott: Hello again Subhash - YES by all means report your carryover losses on Schedule D as you receive up to a $3,000 loss allowance against ordinary income.
lee__Guest_: Is the 1040 ES form used to pay federal tax or SE tax or both? I thought 1040 ES is only used to pay federal tax quarterly and SE tax is paid annually. Please clarify. Thanks.
Steve_Elliott: Lee - the 1040ES is used to pay all types of federal taxes - ordinary, self employment and even household help taxes. Great question, thanks.
cgirl__Guest_: I am a resident of MA and have capital gains distributions from several mutual funds, some with companies based out of state. Are they exempt from MA taxes? For some reason, Turbo Tax is telling me that they might be. How do I determine whether to exclude them on my MA return?
Steve_Elliott: Deaer Cgirl - as a MA resident, most everything would be included in your MA return except for tax free income from MA sources.
eb__Guest_: last year my husband did contract work for a while, as a result we made a tax estimate payment... will the IRS expect that if us again this year, or are we all set as long as our current payroll is paying in porportionately through the year?
Steve_Elliott: Hi Eb - IRS wouldn't necessarily know whether you are all set or not. There is no need to file an estimated tax payment if you have enough withholdings.
tax_question__Guest_: Hi...when using turbo tax it states that MA residents can not claim excise tax. I know many people here that do claim it. Where would we claim it?
Steve_Elliott: Your MA auto or boat excise taxes would be a deduction on your Federal Schedule A as an Itemized Deduction. It is not a MA deduction, only a Federal.
patches__Guest_: I have received a 1099-G for a refund of income tax that I overpaid in '07. I know that I must show this somewhere on my return for '07. However, this refund was not for :"real estate" tax as it appears on the 1099-G, but rather for income tax paid. Since this tax was not real estate tax and not itemized on the return in '07, how do I enter the refund amount on which I don't believe that I owe any tax, since it was a refund of income tax whicH I overpaid?
Steve_Elliott: Hi Patches - did you itemize your deductions on your 2006 return? If so, then your state tax overpayment would be income to report on Line 10 on your Federal return. If you didn't get a refund and applied the amount to 2007, don't forget to claim this on your state return as a credit.
amt_rules__Guest_: i refinanced on 2007 and the company that bought my mortgage sent me a 1098 and listed the interest money received as points. i called them but they have since have gone out of business in the sub prime mess. any advice?
Steve_Elliott: When you refinanced, were you charged (or did you pay points)? If so, the points are amortized over the life of your loan as you did a refinancing.
jone__Guest_: I f a trust has only $2524.00 in (bank) interest income, there is no reportable income to any beneficiary, does a tax return have to be filed?
Steve_Elliott: Jone - A trust gets only a $100 or $300 exemption depending on whether the income is required to be distributed out or not. If there is no requirement, the exemption is $100 and YES a Federal and state trust form (1041 and MA Form 2) would need to be filed.
eb__Guest_: by the way, what is the true cut off for income to receive the stimulus, I know if you hit $150K married/joint then it goes way down, but have you calculated it out? where is the max ceiling?
Steve_Elliott: Hi eb - http://www.usnews.com/articles/business/economy/2008/01/24/how-rebates-would-phase-out.html
Steve_Elliott: The phaseouts are listed.
jper__Guest_: massachusetts allows a rental deduction for taxes - i'm married, but I own the house outright (bought it before we married) and my spouse pays me rent - can my spouse claim his rent deduction?
Steve_Elliott: Dear Jper - Are you filing jointly? You would have to pick up rental income for him to take a rental credit for payments he mde to you.
Steve_Elliott: If you live in the Condo personally and are not renting it, then you are limited to mortgage interest and real estate taxes.
chins__Guest_: Follow up from chins: do the softwares not allow for putting in interests paid on the condo mortgage etc.? are there other deductions I should be looking out for? thx
Steve_Elliott: If you live in the Condo personally and are not renting it, then you are limited to mortgage interest and real estate taxes.
Buddy__Guest_: Thank you for your answer. We do not have children. We are running our taxes both way. So far, my husband gets a refund if he files separately and pays $500 if we file jointly. I have not run mine yet.
Steve_Elliott: You are welcome. Generally it works out best to file jointly.
jomale__Guest_: Another MA question - If I used pret-tax earnings to pay for my transportation pass, does that preclude me from being able to take the commuter deduction on my Mass return?
Steve_Elliott: Yes, the commuter deduction is for out of pocket costs not shielded already for taxes.
taxq__Guest_: I (American) and my wife (Canadian) own a cottage in Canada. We reside in the US. We have not filed anything about it on either a US or Canadian return. We use it minimally for our own use and rent it out to help cover the expenses. It does not operate at a profit. We are thinking of selling it and are trying to find out what we should do about the taxes prior to selling.
Steve_Elliott: Dear Taxq - is your wife a US Green card holder? If so, you should be reporting on "world wide income" on your US return and even at a loss should have been reporting the rental activity. Consult with a CPA to help you with this planning and all the related implications of gain on sale, depreciation allowed or allowable rules, etc.
cgirl__Guest_: Another question. Last year I paid MA estimated taxes. Do I need to pay MA estimated taxes this year simply because I paid them last year, even though I'm getting a MA refund this year? Thanks for doing this, It's very helpful.
Steve_Elliott: Glad you find the chat and website helpful! You have no need to file estimated taxes unless necessary.
eb__Guest_: we didn't have enough for first half of 07, so we made the payment... i just wonder if we are OK to no longer make estimates, given the steady withholdings currently?
Steve_Elliott: As long as your withholding taxes covers 90 percent of your current tax liability, you should be all set :)
anna__Guest_: We use online software and just submitted our taxes for a refund and realized we did not deduct qualified student loan interest. We also recently found that we did not take a deduction for a new furnace and windows we installed in our home in last years taxes. Does resubmitting two years of tax returns mean a closer scrutiny and the possibility of being called in for a review?
Steve_Elliott: Hi Anna - You will need to file amended returns in paper form as they are not yet allowed for electronic filing. By all means have them filed to get back your taxes. There is not extra watchdog approach taken just because you file an amended return. Good luck!
MP35__Guest_: I have recently bought a house and am not familiar with tax rules. What kinds of expenses should we keep for tax purposes and do we file these for the year that they incurred or the year when we sell the house? Is there a limit of years or amount? For example I replaced the heating system in year 2008 for $7000 and then I sell my house lets say in the year 2020, can I still use a receipt of the expenditure from year 2008?
Steve_Elliott: Dear MP35 - You should keep a master file on the computer but also keep all such receipts in a permanent file for better putting together your basis upon future sale. There are no limits to the number of years. Roofs, heating systems, remodeling, painting and most improvements qualify as basis.
patches__Guest_: HI Steve, No, I did not itemize my deductions on my return last year.
Steve_Elliott: Great news then Patches - the state tax overpayment is NOT taxed to you in 2007 since you did not itemize deductions in 2006!
gus__Guest_: We believe our taxes have been misfiled going back to 2003. We trusted someone to do them who royally screwed them up. Is it possible to have a tax preparer fix that for us. We don't owe, we think we didn't get back as much as we should have, such as a credit for having our son.
Steve_Elliott: Dear Gus - Sorry to hear about your problems. Unfortulately, the statue of limitations for your 2003 return is closed. Since that return was due April of 2004, it could only be corrected up until April of 2007 (or up till 10/2007 if you were on extension).
buck__Guest_: Hi, In 2007 both my spouse and I (joint return) made significant use (though less than 50%) of an I Mac we'd bought ("put into service"?) in 2006; would this seem likely candidate for 3-yr or 5-yr depreciation? Thanks, Buck
Steve_Elliott: Dear Buck - are you using the computer for a business ???
chins__Guest_: This is not a question... just a comment: Thank you for your clear and concise answers! Often times on these chats, our first question hardly makes it in! :) You are quick! thx
Steve_Elliott: Thanks Chins :)
Shallimar__Guest_: I have submitted this question 2x since 4:30 a.m. & I notice u r taking f/u quests.-my question was: I had to borrow $ from my credit card to pay for health insurance. Is thios a deductible medical expense on Schedule A since it was for health purposes. Please answer,
Steve_Elliott: Shallimar - check the chat transcript - I answered your question first!!! Yes, you can claim the expenses even though you used your charge card.
college_student__Guest_: I am being claimed as a dependent on my parents tax forms. Because of that I can not deduct student loan interest on my Federal tax form, but I am wondering if the same applies to my MA tax form. Is the state law the same? The instructions are unclear to layman such as myself.
Steve_Elliott: Hi College student - YES, you can deduct the student loan interest for MASS.
tateo__Guest_: In 2007, I was assessed 596.62 in mass state tax plus 149.76 in interest relating to 2004 tax year. I paid the full amount in 2007.
Steve_Elliott: Hi Tateo - You can deduct only the $596.62 as additional tax payments on Federal Schedule A. The interest and any penalties are not deductible.
lee__Guest_: I am a single owner LLC with both business and personal bank accounts. If the business account shows $20K profit, after paying bills and tax and all expenses, can I just write a check to myself for $20K from the business account to the personal account? Do I have to pay anymore taxes from my personal $20K check, assuming the company has paid all federal and SE tax?
Steve_Elliott: Lee, the LLC amounts show on your 1040. I'm not sure if more taxes would result. Any left over profit can certainly be transferred as a distribution to you.
Shallimar__Guest_: Also, I am the sole wage earner, therefore all bills paid r from my paycheck, does it matter if someone else in the family signs the checks as long as the $ is mine. They r a dependent of mine and live with me.
Steve_Elliott: What type of bills are your referring to Shallimar?
decendent__Guest_: Hi Steve, how do I file a return for a decendent? I was going to e-file the decentdnet's return but it wouldn't let me.
Steve_Elliott: You are unable to efile a return for a single decedent. It needs to be paper filed.
MP35__Guest_: First thank you for doing this. OK, my question is about donations. I have mixed messages about small cash donations and receipts. The last time I heard that the IRS now requires receipts for all donations, no matter how small. Please elaborate. Thank you.
Steve_Elliott: Great question MP - The IRS has really cracked down on donations as people were overreporting the amounts. Keep a log of checks and cash donations and certainly claim them but upon audit you would be possibly called to turn in what you have. The better your records are, then your return should have no change.
mary__Guest_: i am a florida resident but i worked in mass for 2 months last year. How much do you have to earn before you have to file state tax in mass ?
Steve_Elliott: How much did you earn? Were any taxes taken out? If taxes were taken out, I'd advise to file regardless of the amount.
Shallimar__Guest_: Sorry. My computer crashed & by the time I got back on, did not see it. F/U the checks coincide with due dates of paying insurance but nothing written on check memo to show used for that purpose. Is that a problem?
Steve_Elliott: That is not a problem.
college_student__Guest_: Thanks Steve. Turbotax is saying I can not deduct this student loan interest, but I am assuming this may be a bug in the tax law rules in the software.
Steve_Elliott: You should be able to for MASS.
Shallimar__Guest_: medical expenses & am a co-borrower legally liable on mortgage
Steve_Elliott: fine
MP35__Guest_: If you invest in 2007 and lost $ :-(, can you redeem some of the loss through tax return? Thank you.
Steve_Elliott: Yes MP - you can claim stock losses of up to $3,000 each year against ordinary income. Use Schedule D to report the losses and also make sure to claim the excess next year and as long as you need to.
DL__Guest_: I work and live overseas, if I declare my income with the IRS, is possible to get a tax refund even though I pay no US taxes or make any US income. An am I eligiable for the tax break(stimulus) coming in may?
Steve_Elliott: DL - are you a US citizen?
patches__Guest_: Is there a home heating fuel credit for MA this year? Is there an opportunity to claim a credit for a boiler purchasein Nov '06? The purchase date time frame seems to be limited to 10/03 through 3/06.
Steve_Elliott: I don't see any extension of the 3/31/06 date Patches, sorry.
DL__Guest_: yes
Steve_Elliott: As a US Citizen, you should be reporting your worldwide income on form 1040 unless you are exempted by treaty. Consider using a CPA to help sort this out for you.
Shallimar__Guest_: Am I also eligible to deduct Homeowners and Real Estate Tax since as I said, I am legally responsible for the bank mortgage and pay those also
Steve_Elliott: Real estate taxes are ok for deductions, however, homeowners insurance is not a deduction unless you use the home for rental or business purposes.
Subhash__Guest_: Another followup question --- It is still not clear to me if I can report the short capital gains amount from the mutual funds on Schedule D instead of as dividends on Schedule B? Doing this will reduce my tax liability as those gains would be offset with the prior year losses. Note that I would be filing Schedule D regardless of this and would still use the $3000 loss to offset against the ordinary income.
Steve_Elliott: Subhash - you cannot report the current year dividends on Schedule D even though they are calling them short term dividends. These must be reported on Schedule B as dividends.
DL__Guest_: so i can not get a refund or the stimulus
Steve_Elliott: If you file a US return and have reportable income you may or may not get the stimulas depending on your income.
student__Guest_: I am a student who made about 10,000$ last year in income working in landscaping over the summer. I know I need to file taxes but have had trouble figuring out how much and what forms to use?
Steve_Elliott: Hi Student - You would need to file Schedule C as part of Form 1040. The Schedule C reports income and related expenses that are not reimbursed. You are taxed on the net amount for ordinary income taxes plus you need Schedule SE for Self-employment taxes if you are under 18.
Shallimar__Guest_: If I paid the Real Estate Taxes over time, can I also deduct that interest
Steve_Elliott: The interest on this would be considered nondeductible personal interest.
lee__Guest_: Question on travel expense: If I choose to opt for per diem reimbursement for lodging and food instead of using actual receipts, can I still deduct for the lodging portion if I stay at a friend's house during a business trip?
Steve_Elliott: Lee - here is the IRS publication on Per diem.
Steve_Elliott: http://www.irs.gov/publications/p1542/index.html
eb__Guest_: in general, do you think tax preparers do a better job vs the turbo taxes of the world? taxes make me nervous to do, so I pay someone, but i wonder if i pay for nothing really
Steve_Elliott: Eb - this is a personal decision and also based on your tax complexity. CPA's and other qualified preparers can certainly help with saving taxes and planning as they are required to be trained and educated about new laws, etc.
student__Guest_: I am over 18, so do I still need to file a Schedule SE?
Steve_Elliott: Yes, being over 18 means your net income is also subject to self employment taxes.
Steve_Elliott: Time is running out but I will stay for a few more minutes for any follow up questions.
mary__Guest_: No taxes were taken out, i was self employed. i earned about $5000 before any deductions.
Steve_Elliott: Mary, here are the up to date rules:
Steve_Elliott: Form 1-NR/PY: Massachusetts Nonresident or Part-Year Resident Income Tax Return, Schedules and Instructions
Steve_Elliott: The Department of Revenue is no longer supporting fill-in versions of the Forms 1 and 1-NR/PY. Taxpayers can access printable version of the forms from the links below.
Steve_Elliott: Form 1-NR/PY Instructions
Steve_Elliott: Form 1-NR/PY , Nonresident or Part-Year Resident Income Tax Return IMPORTANT: Schedule HC, Health Care Information, MUST be filed by certain part-year residents with Form 1-NR/PY. Failure to do so will result in a delay in the processing of your return.
Steve_Elliott: Schedule HC , Heath Care Information
Steve_Elliott: IMPORTANT: Schedule HC, Health Care Information, MUST be filed by certain part-year residents with Form 1-NR/PY. Failure to do so will result in a delay in the processing of your return.
Steve_Elliott: Schedule HC Instructions
Steve_Elliott: Schedules X, Y
Steve_Elliott: Schedule Z, DI
Steve_Elliott: Schedule B
Steve_Elliott: Schedule D
Steve_Elliott: Schedule E , Parts I, II & III
Steve_Elliott: Schedule C
Steve_Elliott: Schedule CB
Steve_Elliott: Schedule NTS-L-NR/PY (including Schedule F)
Steve_Elliott: Schedule R/NR
Steve_Elliott: Form PV , Payment Voucher
Steve_Elliott: 5.3% Tax Table
Steve_Elliott: In addition to updating the obvious year-end dates, the following changes have been made to Form 1, Form 1-NR/PY and schedules-
Steve_Elliott: Form 1 and Form 1-NR/PY, resident and certain part-year resident taxpayers must file the new Schedule HC, Health Care Information, to calculate the amount of their personal exemption. Under the new health care mandate, taxpayers age 18 and over must have health insurance by December 31, 2007. Those who do not, with certain exceptions, will lose their personal exemption;
Steve_Elliott: Form 1 and Form 1-NR/PY personal exemption amounts increased to $4,125 for single and married filing separate, $6,375 for head of household and $8,250 for married filing jointly;
Steve_Elliott: Form 1, line 15 and Form 1-NR/PY, line 19 Schedule Y line reference changed from line 17 to line 16;
Steve_Elliott: Schedule Y, line14, Home heating fuel deduction, removed (deduction expired) and Schedule Y renumbered accordingly;
Steve_Elliott: Schedule B, line 36 and Schedule D, line 19, text referring to excess home heating fuel deduction deleted (deduction expired);
Steve_Elliott: Form 1-NR/PY, Schedule NTS-L-NR/PY, line 11, No Tax Status amounts for married filing a joint return changed to $15,850 plus $1,000 per dependent and for head of household to $13,975 plus $1,000 per dependent;
Steve_Elliott: Form 1-NR/PY, Schedule NTS-L-NR/PY, line 12, Limited Income Credits amounts for married filing a joint return changed to $27,738 plus $1,750 per dependent and for head of household to $24,456 plus $1,750 per dependent; and
Steve_Elliott: Form 1-NR/PY, Schedule F, Credit for Income Taxes Paid to Other Jurisdictions changed to Credit for Income Taxes Due to Other Jurisdictions.
Steve_Elliott: Changes made since July 15 posting-
Steve_Elliott: Fill in field on Form 1 and Form 1-NR/PY, page 1 in the Exemption section for taxpayers under age 18.
Steve_Elliott: Key arrows added to "Dates as Massachusetts Resident" field on Form 1-NR/PY, page 1.
Steve_Elliott: Form 1, page 2, new line 41 and Form 1-NR/PY, page 3, new line 46 added for a Refundable film credit. Subsequent renumbering done accordingly.
Steve_Elliott: Motion picture production companies qualify to elect a refundable film credit if they have not transferred or carried forward a portion of the film credit for the production/certificate number to be refunded. Transferees of the film credit do not qualify for the refundable film credit.
taxpayer48__Guest_: Missed me?
Steve_Elliott: What did you ask?
Shallimar__Guest_: my questions have come about beause I am, or so I'm told, being randomly audited for 2005.I can't locate a very few receipts from pharmacies & the pharmacies have purged the data already. Should I mention this in my statement to the IRS or say nothing? Also, I have always done my own taxes, should I employ a CPA for help with this ?
Steve_Elliott: I would recommend using a CPA to help you with this audit unless you feel comfortable in handling it yourself. YES, you would certainly want to mention that the pharmacy had purged their records, but you should have some backup from your tax return.
Steve_Elliott: I didn't see that Buck -
taxpayer48__Guest_: Short version: My 2007 1040ES was paid in Jan. 2008. Some portion of this was for SE tax. Can I deduct this SE tax from my Mass. income tax for 2007 or 2008?
Steve_Elliott: The SE tax deduction is usually limited. If anything was allowed it would be 2008.
buck__Guest_: Spouse used as self-employed consultant paid on 1099. I used as distance learning instructor paid on W2-Buck
Steve_Elliott: Part of the computer can be depreciated on your wife's Schedule C. Part can also be employee business expenses for you though these are subject to 2 percent of income limitations.
Shallimar__Guest_: I have backup from checks written & charge card receipts as well as checkbook ledgers with memos but some of the credit cards are in my dependents' names. Also, they don't specifiy type of Rx, etc.
Steve_Elliott: This should be ok and it wouldn't matter it was for a dependent.
mltoh__Guest_: Hi. I'm a legal immigrant. Part of what I was required to do to keep my job was to hire an attorney to handle my multiple visa applications, including permanent residency. Is it possible to claim such legal fees in my federal tax return?
Steve_Elliott: Hi Mltoh -
Steve_Elliott: Sorry, but these legal expenses are considered personal and therefore non-deductible. Only tax advice portion of legal fees would be deductible.
Shallimar__Guest_: Sorrry to bother u again but I assume if I have all supporting documents that any fees, penalties & interest would be forgiven? Also, should I hold off on filing for 2007 til this is resolved? I usually file very early. I also always get a refund so I don't owe $
Steve_Elliott: I would not wait to file 2007 because of this from 2005. If you have supporting documents then you should be ok and possibly have no tax changes.
Steve_Elliott: THANK YOU TO all of you for your questions and interest in Ask A CPA! Watch for future live chats as well, and you can always use the regular posting system through www.boston.com
Steve_Elliott: Thanks Again, Steve
eb__Guest_: you mention we have limitations to correcting old returns - is this the same cutoff the IRS gives itself if they find an error? or do they have a longer window to "come after you"?
Steve_Elliott: The window is the same Eb - three years from the due date of the return (generally) unless there is fraud which doubles the statue.
Steve_Elliott: For example, your 2004 tax return which was due April 15, 2005 could still be amended up through April 15, 2008.
college_student__Guest_: Thanks Steve!
Steve_Elliott: Glad to help and best of luck at school and in your career!
eb__Guest_: no fraud... just still working on clearing up an old error, first IRS, then MA found out about it - no tax liability... just didn't attach a form to prove a 401k rolled over
Steve_Elliott: Great! No tax liability is the best answer :)
Shallimar__Guest_: Do they tend to examine other years' retuens- I'd hate to do this all over again.
Steve_Elliott: Not necessarily
Shallimar__Guest_: Am I correct that all penalties, fees and interest will be forgiven if there are no errors on my return?
Steve_Elliott: Yes
Shallimar__Guest_: Again, thank you so much!!!!!
Steve_Elliott: You are most welcome, best of luck to you and please do consider using a CPA to assist you. Ask A CPA has links to help you find a local CPA to your home or work.
Shallimar__Guest_: 1 lst question please. I keep being told that the info should be faxed. Shouldn't it be certified mailAlso, if necessary for the CPA to answer questions to the IRS aren't there local offfices they can go into to discuss
Steve_Elliott: Faxing is fine if you are handling this yourself. Keep the Fax receipt as proof it went through. Yes, a CPA would possibly arrange to meet a IRS agent only if necessary. Otherwise audits can be handled by phone, fax and computer.
Shallimar__Guest_: In gathering my documents I actually found things I did not submit before. Should I send that to even tho it gives me a larger Schedule A deduction? Is it also true that the IRS reports to the state so any changes means re-filing with MA as well?
Steve_Elliott: YES, submit all records as the return is still open until April 15, 2008 if not later (if you were on extension). You would need to file a MA amended return by the 3 year statue of limitations date (probably April 15, 2008).
Steve_Elliott: THANKS AGAIN EVERYONE - signing off
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