Your Tax Question - 034

Dear John, I paid a Lawyer to assemble my will. I have been told that these charges are deductible on my taxes - is this true? Sincerely, Wilma
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Hi Wilma,

The IRS accepts legal fees deductible only as those services pertain to the production of income. For instance, if you hired a lawyer to write a lease for you to use in your rental property then those fees would be deductible. Or in the case of divorce, attorney fees attributable to collecting alimony is deductible as well.

I am sorry but the fees paid to a lawyer to have your will completed is not deductible.

Thanks for the question,
John

PS. Time is running short, email me if you would like one of the remaining slots on my client list.

Your Tax Question - 033

Dear John, I know I earned $500 worth of income from a side job this past year but I have not received a 1099 from the company that I did the work for - what should I do? Thank you, Gina.
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Hi Gina,

The company that you did the work for is not required to issue you a 1099 unless you earn more than $599.00 which means that you likely will not get one. Assuming that you do not have a business and do not file the Schedule C or C-EZ, You can claim this income on Line 21 of the Form 1040.

I hope this helps,
John

PS. I am more than happy to help you with this if you need a tax preparer. Email me.

Your Tax Question - 032

Dear John, I've heard that the First-Time Homebuyers Credit now applies to those of us that recently bought a house but are not actually a First-Time Homebuyer. Is this true? Hank
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Hi Hank,

The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase. The Maximum credit remains at $8,000.

Additionally, this law provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.

Thanks for the question,
John

PS. April 15th is getting closer - email me.

Your Tax Question - 031

Dear John, This year I received my W-2 and I also received a 1099 from the same job but the 1099 has a different business name on it. My tax software is now requiring me to fill out a Schedule C as part of my taxes. Filing out a Schedule C is requiring me to answer a bunch of questions that I don't have answers for. Can I get around filing out the Schedule C? Thanks, Pat
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Hi Pat,

I don't want to get into a guessing game here so I would suggest that you call your company and find out if there was not a mistake and inquire why this happened. Remember, that the IRS will make a determination about your worker status, simply fill out Form SS-8.

Sorry, there really is no way around the Schedule C-EZ in this case. If there were no you taxes withheld from the 1099 (which I doubt that there were) you will have to pay double on the Social Security and Medicare portions of your wages. This is all covered on the 1040 SE form when you do your taxes. It should not be too difficult just a little extra effort.

I hope this helps.
John

PS. I know of a great tax guy if you need one. ;-) Email me

Your Tax Question - 030

Dear John, I was given stock options as a bonus several years ago, and I was required to "exercise" them in 2009. I have a receipt showing the estimated price at exercise, broker proceeds, grant price/share, taxable amount, tax rate, estimated tax, and net income. At the bottom it says that local payroll will pay the taxes and distribute the remainder as income. It looks like everything was taken care of, and the net proceeds were less than $1000 (woo hoo -- some bonus!). How do I declare this? Is it on the misc income section of the tax return? Thanks, Frank
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Hi Frank,

The simple answer is: "You have a long term gain which gets entered on 1040, Line 13"

The more informative answer:

Employers and banks have until January 31 to have W-2 and 1099 forms mailed. Brokerage houses, on the other hand, have until February 15 to have 1099-B forms mailed to clients -Your exercised stock options fall into this 1099-B category. The information from the 1099-B will be used to fill out 1040 Schedule D which when finished will be used to fill in Line 13 of your Form 1040.

Welcome to the world of stock options!

Good luck,
John

PS. I still have room on my client list if you need me to handle this for you. email me

Your Tax Question - 029

Dear John, The last few years my wife and I have ended up owing taxes to MI, but this year since it's over $500 we're being penalized for it being late. Last year we paid over $500 and weren't penalized. is this was a new law this year. I'm rather ignorant about taxes and rely on TurboTax to help me out. Thx, Chuck
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Hi Chuck,

There are 10 civil and 4 criminal penalties imposed by MI but without seeing the forms and reasoning of your software program I am at a loss as to what your specific situation is. With that disclaimer I am willing to venture that the state acts like the federal in situations like this. When you owe Federal Taxes of over $1000 in a year you are required to pay Estimated Tax because simply put - the government will not wait for money. I am guessing that this is why you have been gigged for the $500 mark on your state taxes. Why this year and not last? I am not sure.

My best advice is to search your program's Help for the answer and you may even have to call the State Treasury Department. However, when it boils down to it, you may be further ahead to simply pay the fines than to hire a tax professional to solve this problem.

And oh yeah, consider fixing your W-4 with your HR department at work so that they can start taking more money out of your paycheck.

I hope this helps,
John

PS. I know a really good tax guy ;-) email me.