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Do I Have to File a Tax Return? And More Tax Q&A – Ask the Tax Pro 2/14/13

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The experts from Corporate Tax Network answer tax questions for free on the LegalZoom Facebook Page on Thursdays. Did you miss the last Ask the Tax Pro? Don’t worry. We’ve got it all right here.

Brandon: Is there an amount of money one can make that the IRS dismisses before it would be taxable income? My thoughts go toward lemon-aide stands, and infrequent proprietary ventures, also online commerce, like ebay…

Corporate Tax Network: Hi Brandon, if you own a business, you would have to report the business profit/loss regardless of the amount every year to the IRS by the tax filing deadline. If your question pertains to your individual return, here is a link to the IRS website which would help determine if a return needs to be filed: http://www.irs.gov/Individuals/Do-You-Need-to-File-a-Federal-Income-Tax-Return%3F-

Dustin: I have an LLC in Nevada since 2011. In 2011 I had a loss of $4k and in 2012 a loss of $15K. Considering I have never filed anything can I combine the loss from 2011 and 2012 when I file my 2012 taxes?? Thanks…

Corporate Tax Network: Hi Dustin, If you registered an LLC in 2011, and the business was active, you would need to amend your 2011 form 1040 (assuming the business is a single member LLC) and include your business income and expenses on the Schedule C. You would then file another Schedule C in 2012 to show your 2012 business income/loss. If the business was not active in 2011, then the expenses incurred in 2011 would not qualify for a deduction in that year. Instead, you would claim the expenses as “Start-Up Costs” in the year in which the business becomes active. Start-up costs are deductible up to $5000, any remaining amount would be amortized over 15 years.

Art: I’m a firearms instructor here in Texas and I own an LLC. Do I have to pay taxes on all that income? What qualifies as business expenses to offset the income tax that I might have to pay?

Corporate Tax Network: Hi Art,
Luckily you live in a state with no individual income tax, so you would not need to pay state income tax on your profits. However, the net profit from business will be subject to both federal income tax and self-employment tax on your personal tax return (assuming this is either a Single Member or Multi Member LLC). You can claim reasonable business expenses to offset the income. Most common expenses include; Rent, Supplies, travel, Professional fees, training expenses, internet, telephone, advertising etc. Check out this link – Form 1040 Schedule C for a list of expense categories: http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

Bob: I got zapped on my Federal tax rebate this year because of jury duty payments. Why were no Federal taxes taken out of these payments?

Corporate Tax Network: Hi Bob, Jury duty payments are treated as though you are an independent contractor, where no taxes are withheld. Unfortunately, that makes you responsible for the taxes.

Gilbert: how can i get the Education tax Credits

Corporate Tax Network: Hi Gilbert, Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits you can subtract in full from the federal income tax. The American Opportunity Tax Credit modifies the existing Hope Credit for tax years 2009 and 2010 under ARRA. The credit was extended to apply for tax years 2011 and 2012 by the Tax Relief and Job Creation Act of 2010. The new credit makes the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels

On the other hand, The Lifetime Learning Credit can be claimed for for undergraduate, graduate and professional degree courses – including courses to improve job skills – regardless of the number of years in the program. Eligible taxpayers may qualify for up to $2,000 – $4,000 if a student in a Midwestern disaster area – per tax return.

Please consult your tax preparer to help you determine which credit you could deduct in your income taxes.

Winston: According to a Missouri State Statute, each lot is suppose to get it’s own tax bill, but the Missouri Dept of Revenue has taken it a step further and if a person owns more than one lot, in a row, those tax bills are consolidated. I think that this is against the Missouri State Statute.. that was passed by the lawmakers.. what is your ‘take’ on this?

Corporate Tax Network: Hi Winston, ff you think there is enough support for reversing this law, you might want to look in starting a petition. In most states, if a petition gets enough support, it can be put on the state ballot as a referendum

James: My question is this: purchased a new condo in 2004 at which time along with our primary mortgage we had a ” piggyback ” loan, home equity loan, to provide a 20% down payment. In 2007 I understand that Congress allowed homeowners to deduct the entire payment as a tax deduction. In this provision it was allowed for any new homeowners or to those who refinanced their mortgages. This provision has been extended every year including 2012.

I refinanced my condo in 2008 to a lower interest rates. Will I be allowed to deduct the entire payment for this loan through 2012 and not just the interest.

Thank you!

Corporate Tax Network: Hi James, You can deduct interest payments on loans that are secured by your primary residence. That would apply to the primary mortgage as well as other loans on the property. When you re-finance a mortgage, if you pay “points”, that payment would be a deduction also.

Lacey: I live with my boyfriend, who is still married by law (papers not filed in court yet). My question is in MI does he file Head Of Houshold or Married Filing Seperately since he provides all the support for me and my daughter (i have full custody) and our daughter we just had in December of 2012?

Corporate Tax Network: Hi Lacey, There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. Your filing status is used to determine your filing requirements, standard deduction, eligibility for certain credits, and your correct tax. Your marital status on the last day of the year is your marital status for the entire year. Thus, if you are not legally married as of Dec 31, 2012 your filing status is either single or head of house hold. The head of household will allow you to pay the lowest taxes. On the other hand, your boyfriend will have to file married filing separately/jointly with his spouse.

Lacey: so he cant claim me or my other daughter even though i have no income and he supports us

Corporate Tax Network: Lacey, He can claim you and your daughter as dependents if you qualify. But he cannot be considered a head of household for tax purposes, until he gets a divorce. Here is a link to the IRS website which will help determine if he can claim you as a dependent: http://www.irs.gov/uac/Who-Can-I-Claim-as-a-Dependent%3F

Jesse: My tax guy got me a $5000 tax refund for 2012…only prob is I owe child support services that amount in arrears (long complicated story)….anyth ing I can do so the money is not intercepted…. any hardship form? Or maybe talk to child support services??? I have a payment plan instilled but last year they garnished too…

Corporate Tax Network: Hi Jesse, It sounds like you should work with your creditor to see if an acceptable payment plan can be worked out. If your refund was garnished last year, that will happen again this year.

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February 18th, 2013 at 5:55 am