Your Tax Question - 010

Dear John, Our home just recently burned and all of my paperwork for this year’s taxes was destroyed – what am I supposed to do? Frank.
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Hey Frank,

Sorry to hear about the home, I pray everyone was alright. Not to worry with the April 15th deadline. Simply fill out IRS Form 4868 for an automatic 6 months extension on your taxes' due date. You will have to send in the form with a reasonable estimation of your tax due and then pay an interest rate on any unpaid tax actually due from the original due date. It is not the best you could hope for but at least there is a little something for such a catastrophe.

Warmly,
John

PS. If you need help with this please email me.

Your Tax Question - 009

Dear John, My husband and I just adopted a baby girl from China and we have to get her a Social Security number, how do we do this? Thanks, Rita.
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Dear Rita,

I would have thought that the agency that managed your adoption process should have given you all this information (that’s my way of saying that I am not exactly sure). I know that you will need a number for her to claim her on your taxes but I am not positive if she will have a SSN or need a ATIN (Adoption Taxpayer Identification Number) during the process of getting her a SSN. However, try this link for more information - IRS website.

I hope this helps,
John

PS. If you and your husband need a tax preparer for the tax season - I know a guy. Email me

Your Tax Question - 008

Dear John, My son (whose name is also John btw) is 17 years old and he just sold a stock that made him quite a bit of money. The gain was placed in a 529 IRA for college. How will this affect my taxes? Sincerely, Betty.
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Hi Betty,

I need some investing tips from your son. ;-)

On the face of it, it appears that your son will have to file and claim his gain as income and pay your top marginal rate. This is due to what is known as the ‘Kiddie Tax’. Unfortunately, high income wage earners were transferring gains into their children’s names and paying the taxes due at the child’s lower tax rate. The IRS got wise and viola! The ‘Kiddie Tax’ is here. Be sure to check with your paid tax expert for more detail.

Hope this helps,
John

PS. There is still room on my client list for you. Email me

Your Tax Question - 007

Dear John, I married a man from Istanbul and we live in Colorado. He is not a citizen of the US, will he need to file a tax return this year? Thanks, Erin.
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Hi Erin,

Congrats on the marriage and welcome to self-denial ;-). There are 3 things to consider with a resident alien:

1. Has he become a legal permanent resident any time this year?
   
2. Has he ever elected to be treated as a US citizen with the IRS before this?
   
3. Does he satisfy the “Substantial Presence Test” (http://www.irs.gov/businesses/small/international/article/0,,id=96352,00.html)?
   

If any of these are true then yes he must file a tax return this year.

Yours,
John

PS. My services are not that pricey. If you hurry, you can become 1 of my 30 clients for this tax season. Email me.

Your Tax Question - 006b

This is a continuation from - Your Tax Question - 006a...
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Wendel, You should also consider who is your Qualifying Relative for determining who is your dependent as an exemption on your taxes. People who failed to meet any one of the Qualifying Child Tests, you may find that they do qualify as a Qualifying Relative. A Qualifying Relative must satisfy just four tests:

1. The Relationship Test
2. The Gross Income Test
3. The Support Test
4. The Dependency Test

1. The Relationship Test

• A child or decedent of said child
• Sibling or step-sibling
  
• Parent or decedent of either
• Step-parent
• A sibling's child
• In-Laws (son, daughter, mother, father, brother, sister)
• any individual who shares the sajme principal abode as the tax-payer

2. The Gross Income test

• Must have less than $3,650 of income

3. The Support Test

• Over half of the dependent's total support for the year must have been provided by the tax-payer.
• Special rules apply for multi-support agreement for children of divorced persons.

4. The individual must not have been the qualifying child of anyone else during the year. All in all, many people qualify to be your dependent if they have lived in your home for the year but then the Gross Income and Support Tests may bump them out as easily as they qualified. Be sure to discuss all of this with your tax professional. Best to you, John
PS. If you don't have a tax professional yet, be sure to contact me about how you can get on my client list. Email me

Your Tax Question - 006a

Dear John, Since the downturn in the economy my household has grown and I now have more people living in our home. My wife's 12 year old son moved in with us after his father lost his job and could not afford to keep him, my brother-in-law and his family moved in a few month's ago after he lost his house, and my great-uncle has moved in with us. (It is a zoo around here.) What sorts of things do I need to consider when tax time rolls around? Thank you, Wendel
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Dear Wendel,

I remember seeing the movie "Cheaper By The Dozen" and thinking that it would be great to have a busy house - I cried 'Uncle' after the third child.

Your question has many things that a tax expert would need to discuss with you - I highly advise this. However, I want to take this opportunity to explain 2 issues that you will need to consider for this tax season. With all of the people that you describe as living in you home you may be able to claim all or some of them as your dependent. There are 2 basic types of dependents available to you: Qualifying Child & Qualifying Relative.

First, Qualifying Child: There are 5 test that ned to be met before a child can be considered your dependent.

1. Relationship Test
2. Age Test
3. Principal Place of Abode Test
   
4. Support Test
5. Join Return Test

1. The relationship test is very liberal for who is your dependent as a child.

• Your child, step-child, or decedent of either a
• Your sibling, step-sibling, or decent of either satisfies the relationship test.
  
• This also include foster or adopted children as well.

2. The Age test stipulates that a child:

• Be younger than the taxpayer
• Younger than age 19 (or a full-time student under 24 years of age)
• This test is suspended for anyone who is permanently disabled at at anytime during the year.
  

3. The Principal Place of Abode Test:

• More than one-half of the year.

4. The Support Test:

• Must not have provided for more than 1/2 of there support for the year.

5. The Joint Return Test:

• The dependent must not have filed a Joint Return with their spouse except as a claim for refund.

A big thing to consider is that no child is claimed twice. The IRS frowns on this and will determine who the rightful claimant is dependent on their standard known as the "Tie Breaker Rules".

These are the basics of claiming a person as a Qualifying Child for dependent status. In the next post I will continue answering your question as I will describe who is a Qualifying Relative.

John

PS. I highly suggest talking through the issues with a tax professional - Email me.

Your Tax Question - 005

(The following is only a partial portion of the whole question)

Dear John, I am separated from my husband but we plan to still file a joint return this next year... ...what are some of the ramifications of this? Thanks in advance, Emma.
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Dear Emma,

Sorry about the separation, I really pray that you can reconcile. Your question leaves a lot of the details out but basically married couples filing jointly get the largest standard tax deductions – that is until you have a separate address from your spouse. Apparently, too many people were getting legally married in order to benefit from the tax breaks of the Joint status. However, the IRS got wise and now it requires that married couples have the same permanent address. Be sure that you AND your spouse discuss the particulars with a tax professional in order to best maneuver this one.

Yours, John

PS. My services are available and they not that pricey. Email Me

Your Tax Question - 004

Dear John, People ask you tax questions but why should I trust your answers? Hazel.
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Dear Hazel,

In the spirit of Mary Poppins let me just say: “…let me make myself perfectly clear… …I never explain myself.” But, In a nutshell if you don’t trust my answers you should abandon me like a Mercury Lynx with a warped engine head.

Best of luck,
John.

PS. What’s not to trust? I am Practically Perfect in Every Way – get on my limited list of clients you won’t be sorry, I promise. Email Me

Your Tax Question - 003

Dear John, What is this Making Work Pay Credit that I keep hearing about? Thanks, Jim
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Hi Jim,

You get a $400 (or $800 on a joint return) credit just for having a job (i.e. Earned Income). You likely got this added in your paycheck throughout this year but if not you will have to fill out a Schedule M to claim it.

Best,
John

PS. I would be happy to add you to my limited list of clients for this tax season to make sure that you get all of the credit due to you. Email me -dullc2005@gmail.com

Your Tax Question - 002

Dear John, Does my grandmother have to file a tax return this year? Thank you, Penny.
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Hi Penny,

There are some factors to be considered. Did your grandmother get paid wages? Did she have “Unearned Income” over $950 (interest, dividends, rental properties, etc.), is she over 65? You need to talk with a tax professional or you can visit the IRS website for more details.
http://www.irs.gov/individuals/article/0,,id=96623,00.html.

Blessings,
John

PS. I would love to add you and your grandma to my limited client list for this tax season. Email me.

Your Tax Question - 001

Dear John, I was told that if I did not have enough taxes taken out of my wages through the year that I would have to pay a penalty – is this true? Alex.
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Hi Alex,

The government wants their money as you earn it so if you owe more that $1000 in taxes at the end of the year, Uncle Sam will consider it a loan to you and require that you pay the interest on that loan as well as a fee. I wonder who learned from who - the Credit Card company or the IRS? In any case, you will need to then estimate your taxes for the next tax year and begin making quarterly payments.

Best Wishes,
John

PS.There are ways to avoid the fees. If you need some help with this please email me and become 1 of my limited 30 clients for this upcoming tax season. Email me: dullc2005@gmail.com