Do you have questions about your 2011 tax returns? Kiplinger's tax expert Kevin McCormally will be online in one hour to offer free tax advice. Submit your question early by clicking "make a comment now," and join the discussion live from 1:30pm - 2:30pm ET. We hope to see you soon!
Welcome to today's live tax chat! Our tax expert Kevin McCormally is here today to help you with your 2011 tax returns. Thanks for joining us, Kevin.
There has a been a lot of talk in the news lately about tax return fraud. Kevin, can you talk about what this means for our readers, and offer some tips on how they can help prevent it from happening to them?
Sure. Lots of news reports about i.d. thieves filing phoney tax returns and stealing folks' refunds.
Here’s a little known fact: Although the IRS has already issued about 50 million refunds, the agency has yet to receive ANY W-2 information against which to match what folks are reporting on returns. Sure, employees get their W-2s by the end of January, but the information does not go to the IRS as the same time. Instead, it goes to the Social Security Administration first, by the end of February – yesterday – for maybe not until the end of March. And then only after that does it go to the IRS. So, if the IRS were to wait until it could match W-2s against every return, there would be a riot from folks waiting for their refunds.
The IRS does have ways to block phony returns…and says it stopped about 250,000 last year…but it’s not perfect.
It can be a real, time-consuming pain to straighten things out if an i.d. thief does steal your refund. The best way to make sure that doesn’t happen is to NOT have a refund coming in the first place. Accurately match withholding from your paychecks to what you’ll actually owe. Use our tax withholding calculator to get a fix on how many allowances you should be claiming on the W-4 form filed with your employer. Get your money when you earn it, not as a refund NEXT spring.
Now, let's get started with the first question. This one's from KC.
Sure. While you have to have a high deductible policy to qualify to contribute to an HSA, you don’t have to have one to withdraw from the account for qualified expenses. This can often happen if someone sets up an HSA under one employer and then moves to a job with another employer who doesn’t offer a qualifying high-deductible plan.
You’re on firm ground for the LTC insurance deduction (up to the limit based on your age, $3,390 if you’re 60 to 70, for example, or $4,240 if you’re over 70). But I’m not so certain about the medical insurance. The law is clear that you do not qualify for self-employed insurance write-off (which is an adjustment to income rather than an itemized deduction subject to the 7.5% of AGI threshold) if you can qualify for any employer subsidized policy. Since your policy is subsidized by a former employer, they may disqualify the payments. After a quick review of IRS regs and rulings, I could not find an definitive answer. Sorry.
I think you have the same level of risk...which is LOW. You need the password to file yourself, but an i.d. thief could file if he/she has your SS number. I wouldn't lose any sleep over this; just fix your withholding
Ah, there's the rub. The law allows the deduction of a certain amount of long-term care insurance premiums based on the taxpayers age ($3,390 maximum for someone age 65 in 2011), but the write-off is considered a medical expense and such costs are deductible only if you itemize and then only to the extent your total medical expenses exceed 7.5% of your adjusted gross income. I assume your total falls below the threshold and that’s why your tax guy says no tax benefit. Even though medical costs are "deductible", very few taxpayers ever get a tax benefit, either because they don't itemize (75%) or because they don't reach the 7.5% threshold.
I'm pretty sure the basis remains the same, just as with a gift of stock. When you give someone appreciated asset like stocks or mutual funds shares, you also give them your tax basis.
Great questions, but I’m afraid there are too many moving parts – the size and rate on the credit card and IRS debt, how you’re paying those off now, where you’d live and at what cost if you don’t buy a new home, to name a few – to give a solid answer.
I can't really give any advice here except to tell you that this is something the IRS watches carefully if it appears that too much of the income is going out as dividends rather than compensation.
Yes, the special 15% rate for qualified dividends (0% for taxpayers who fall in the 10% and 15% tax brackets) applies for dividends received in 2011 (and 2012). Be sure you use the appropriate worksheet in the 1040 instructions to figure your tax so you don’t shortchange yourself.
The right to contribute to a Roth phases out as AGI moves between $169,000 and $179,000 on 2011 joint returns and $107,000 and $122,000 on single returns. If you make too much, remember that you can contribute to a traditional nondeductible IRA and then convert to a Roth. If you have no other traditional IRAs, the conversion is tax-free; if you have other traditional IRAs, the part of the conversion that is taxable is the same as the ratio of pre-tax and after-tax money in the traditional IRAs.
I’m confused. You don’t report Roth contributions on your return at all, since there’s no deduction for them. Now, if you reported a traditional IRA contribution and deducted the amount you intended to – but did not – contribute, then you should file an amended 2010 return using Form 1040X to correct the error.
You wouldn't subtract the gain, but you should get credit for the tax you paid New York. I'm not sure how TurboTax handles this but a great thing about Turbo this year is that users can call a tax pro -- cpa, tax lawayer or enrolled agent -- for free to get answers to questions just like this. I suggest you give them a call...and please let me know if they satisfy you. I've talked with some of their top people about this program and it sounds great. Put it to the test. Good luck.
Check the turbo web site for the number
There are tricky things with LLPs and basis that I have never looked into carefully. Sorry, but the executor of the will should be able to offer guidance on this point.
There has been a lot of confusion over this issue. At one point, it appeared that the IRS would allow after-tax contributions to a 401(k) to be rolled tax-free into a Roth IRA. But now the IRS says the same rules will apply as to rollovers from traditional IRAs. You can't cherry pick the aftertax contributions and move them to a Roth IRA. Instead, any transfer will be considered a combination of pre-tax contributions, untaxed earnings and after-tax contributions. So, a portion of the rollover would be taxed as ordinary income in the year of the conversion.
The insurance settlement is tax-free, but the part of the
new roof paid for with insurance can’t be added to your basis. So, the depreciable basis for the new roof is the $5,000 difference between the settlement and the cost of the new roof. You depreciate it over 39 years.
No, parents can't claim a deduction for interest paid on a child's student loans. But, the child can. The law treats it as though the parents give the money to the child and the child pays the interest. Up to $2,500 a year can be deducted as an adjustment to income, which means the child doesn't have to itemize to benefit. And in most cases, yes, you must use your carryover losses each year or forfeit any part of the $3,000 maximum carryover you don't use. There are some exceptions that generally apply only to very low income taxpayers. But, in general, you don't get to pick and choose when to use them.
Not sure what you mean. Who do you want to transfer the stocks to? Although you are the custodian, the stocks in the account belong to your daughter,
Again, stuff in the account belongs to the child who, because he or she is a child, can't decide to give you the money. So, if you take, it might be consider fraud and I suppose the IRS could declare the custodial account a sham and try to reach back and tax you on the income that has been taxed to the child. Every expert I've ever interviewed on this subject makes one thing crystal clear: Never put anything in a custodial account that you might want back. It's an irrevocable gift. Now, once the child reaches the age of majority, he or she will have the capacity to give you the assets.
You can simply pay off the debt; you need nothing for your taxes. (The federal gift tax doesn't rear its head until a gift surpasses $13,000 a year per recipient and per donor.) If there is interest included in the payoff, your son can deduct that on his return. (By the way, you are generous parents!)
Not sure why you're getting a K-1, unless perhaps you own a master limited partnership inside the IRA. Such MLPs sometimes throw off unrelated business taxable income which is taxable inside the IRA...although it's the responsibility of the I
responsibility of the IRA custodian to file the required return. Check with the IRA sponsor.
The full $3,800 will be reported as taxable income and, at 15%, that will cost you $570. Probably a great investment for tax-free income in retirement.
Please send your note to MY daughter . Sure, anyone can give anyone else a gift. The federal gift tax includes an annual exclusion that allows anyone to give any number of people up to $13,000 a year before having to worry about the federal gift tax. Beyond that level, right now everyone has a tax credit that covers the gift tax bill on up to $5 million of taxable gifts (that is, gifts above the annual exclusion). So, very few Americans ever have to actually pay the gift tax. If your daughter gives you cash or property worth more than $13,000, however, she will need to file a gift tax return (http://www.irs.gov/pub/irs-pdf/f706.pdf) so the IRS can keep track of taxable gifts moving toward the $5 million limit.
Alright folks, Kevin had to get back to work, so unfortunately we are out of time for today's chat. We apologize to all of you who didn't get your questions answered. A huge thanks to Kevin for taking the time to host today's discussion. And thank you to all of you who joined us. We will continue holding more live chats like this in the future. The next one will be held in two weeks, on Thursday, March 15 with planners from the National Association of Personal Finance Advisors (NAPFA). We hope to see you there!