Beacon Journal consumer columnist Betty Lin-Fisher will be joined by three tax experts from a local accounting firm, who will be on hand to answer any questions you have about taxes. Join us right here from noon to 1 p.m.
You can also ask your questions via Twitter @ohiodotcom or on the Akron Beacon Journal Facebook page.
The full transcript of the online chat:
11:58
Betty Lin-Fisher: Thanks for joining us for our live online tax chat. I'm Betty Lin-Fisher, consumer reporter and columnist with the Akron Beacon Journal and I will serve as your moderator. With me are three CPAS with a local firm volunteering through the Ohio Society of CPAs. We will try to get to as many of the questions posed as possible. There may be some questions that may be more complicated and not best answered in this online format. We have two more telephone call-in sessions, where you can call and talk for free to a CPA and I will include the information for that at the end of this session.
12:01
Betty Lin-Fisher: We will start here shortly. We're not quite at our start time yet.
12:01
Betty Lin-Fisher:
Before we start, we need to get some legal stuff out of the way:
IRS Circular 230 Disclosure
Pursuant to U.S. Treasury Department Regulations, we are now required to advise you that any federal tax advice contained in this communication is not intended by the Akron Beacon Journal or the Ohio Society of CPAs or the CPAs involved or their firms to constitute a covered opinion pursuant to regulation section 10.35 or to be used for the purpose of (i) avoiding tax-related penalties under Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any tax-related matters addressed herein.
12:01
Betty Lin-Fisher: Ok, here comes our first question
12:01
Comment From Your Name
Hello, any idea when paper tax instructions will be available to the public.
12:02
Betty Lin-Fisher: This is Betty -- I can answer this one. The Post Offices in our area no longer get the paper tax instructions. Some of the libraries will be getting them, including the Akron-Summit Library. They are still in the process of being printed, so they should arrive shortly. Library officials suggest you call a branch first before you go in. You can also go into a branch and ask for help to print the form from the www.irs.gov website.
12:03
Betty Lin-Fisher: Kerry from Facebook asked this question: Why is the IRS putting returns on hold that contain the form for higher education? I could REALLY use my refund NOW.
12:04
Betty Lin-Fisher: One of the CPAs are typing the answer now...
12:05
CPA2: According to a news release on February 8th, the IRS will begin processing returns with Form 8863 Education Credits on Thursday February 14th.
12:05
Betty Lin-Fisher: Here's our next question:
12:05
Comment From Your Name My father died in Dec 2010 and had two life insurance policies which funded an irrevocable trust in Jan of 2011. The time following his death was chaotic and unfortunately my mother (trustee) did not file tax returns for the trust gains. I've secured an EIN and believe by filing a 1041 I will be compliant for the 2012 tax year, however I'm not sure what I need to do to address the 2011 missed filing
12:06
Betty Lin-Fisher: They are discussing...
12:08
Betty Lin-Fisher: While the CPAs are working on one question, we may move on to another question to keep things moving. We will answer each question that we publish and we will try to get to all in the queue.
12:08
CPA1: Did the trust have any activity in the trust during 2011 besides the funding of it with the life insurance proceeds?
12:08
Betty Lin-Fisher: Here's the next question..
12:08
Comment From Your Name We need to file our taxes now for FAFSA purposes. We owe federal tax. Do we need to pay when we file, or can the payment be sent at a later time,seperate from forms?
12:10
Comment From Your Name There wasn't any distributions, however the funds were invested in various mutual funds by the bank (manages the account). The investments resulted in gains, dividends etc.
12:11
Betty Lin-Fisher: Ok, to keep things straight, we're going to have the CPAs answer the life insurance question first, then the FAFSA one
12:11
CPA1: A 2011 return for the trust should be filed to report any income the trust had for 2011. If there is a balance due there will likely be some penalties and interest.
12:12
Betty Lin-Fisher: They are typing in the answer for the FAFSA question now...
12:14
Betty Lin-Fisher: Here's the next question:
12:14
Comment From Your Name I run a personal business from home, but don't necessarily have a home office. I work from my kitchen or living room. Can my rent, or a percentage of it, be written off?
12:14
CPA2: For FAFSA purposes, you should be able to prepare your return and send a copy to FAFSA without filing with the IRS. You will need to pay your tax by April 15th, or the filing of your return, whichever is earliest.
12:15
Betty Lin-Fisher: CPAs are typing up the answer to the home office question. In the meantime, here's the next question:
12:16
Comment From RAD I purchased a rental property (which I rented out immediately) and funded a portion of it with 0% interest credit card check that had a 1% transaction fee. Can I claim this fee as a finance cost; and is it treated as "Interest" or "Points".
12:16
CPA2: To be entitled to the home office deduction, the portion of your home claimed must be used exclusively as a home office. The deduction is then based on square footage of home office vs. total home. Check IRS Publication 587 for more information.
12:17
Betty Lin-Fisher: While the CPAs are working on the rental property answer, I'll remind the readers that we just published a two-day Tax Guide in the Beacon Journal's business sections on Sunday and Monday that should help you with a lot of information when doing your taxes
12:17
Betty Lin-Fisher: This Sunday story has a lot of the highlights and important information: http://www.ohio.com/business/lin-fisher/important-information-to-know-when-doing-taxes-1.371911
12:18
Betty Lin-Fisher: Here's some Frequently Asked Questions that were provided by the IRS. More FAQs can be found at www.irs.gov http://www.ohio.com/business/lin-fisher/frequently-asked-tax-questions-1.372136
12:19
Betty Lin-Fisher: Here's my Sunday column talking about this online chat and our live phone call-in programs this week. http://www.ohio.com/business/taking-action/betty-lin-fisher-call-in-online-chat-help-offered-for-taxes-top-10-tax-tips-1.371908
12:20
CPA2: Assuming the transaction fee is not something that would need capitalized and added to the basis of the rental property, this would be treated as interest and deducted on Schedule E.
12:20
Betty Lin-Fisher: We had our first call-in last night and we have two remaining: Wednesday night from 6-8 p.m. and Saturday morning from 9 a.m. to noon. You can call 330-996-3644 during those times.
12:20
Betty Lin-Fisher: Also, all of our tax coverage can befound at www.ohio.com/taxes
12:21
Betty Lin-Fisher: Here's the next question:
12:21
Comment From Your Name According to my divorce decree I can claim the excemption for our child and she can claim HH. Now, she has since had another child with someone else and can claim HH anyway. Does it do her any good to claim HH for more than 1 child?
12:22
Betty Lin-Fisher: Ok, they are working on typing the answer...
12:22
CPA1: No. Head of household is a filing status so it won't matter if she can meets the filing status because of one child or multiple children.
12:24
Betty Lin-Fisher: Here's a question we received via email ahead of time: A reader e-mailed to ask why the state of Ohio was delaying the electronic filing of his return using his H&R Block software and wanted to know when it would be ready.
12:24
Betty Lin-Fisher: I’ll answer this one. I checked with the Ohio Department of Taxation. They said that most taxpayers could begin e-filing their taxes with the state on Jan, 30, as long as their software is approved. Each year, software needs to be approved and tested by the state and that testing can begin as early as November the year before.
The state said that most tax software programs are approved, but a few are not and are in the process of being tested, including one of the products by H& R Block.
To check whether the tax software you are using has been approved, go to http://www.tax.ohio.gov/ohio_individual/individual/electronic_filing/ApprovedSoftwareDev2012.aspx
12:25
Betty Lin-Fisher: Here's a response back from the reader asking about the divorce decree:
12:25
Comment From Your Name
So it would be in my best interest to have the decree amended so I can claim HH as well?
12:26
Betty Lin-Fisher: They are discussing...
12:28
Betty Lin-Fisher:
In the meantime, Here's some helpful phone numbers and websites, if you have questions when doing your taxes:
IRS: www.irs.gov, individual tax hotline: 800-829-1040, business tax hotline 800-829-4933
Tax hotline for exempt organizations, retirement plan administrators, and government entitites: 877-829-5500
12:29
Betty Lin-Fisher:
Ohio Department of Taxation is http://tax.ohio.gov
Individual taxpayers assistance 800-282-1780
Business taxpayer assistance 888-405-4039
Income tax refund hotline 800-282-1784
12:29
Betty Lin-Fisher:
While the type the answer to the Head of Household/Divorce question, here's the next question:
12:29
Comment From Your Name
I (a private citizen) loaned money to a friend as a mortgage for a house. I assume I have to pay taxes on the interest received. Where does this go on my taxes?
12:29
CPA2: Yes, it would be beneficial for you to claim HOH and it would not be a detriment to her if she can now claim HOH without specifically allowed by the divorce decree. Be sure to review all of the HOH requirement before changing anything, in the event that she would not qualify for HOH status.
12:31
Betty Lin-Fisher: As they are typing the answer to that question, here's a link to a story about free tax help on Saturdays for income-eligible taxpayers:http://www.ohio.com/news/local/saturday-walk-in-events-provide-free-tax-help-1.370882
12:33
CPA1: Yes. You would report the interest income on Line 8a of your 1040. You may have to file Schedule B which provides a breakdown of the interest if your total interest income exceeds $1,500.
12:34
Betty Lin-Fisher: D. Schmith asked this question via email. On Dec. 27, she took a distribution from an annuity and had the appropriate taxes deducted. Circumstances changed and she reversed the distribution on Jan. 2 for the full amount and the organization was able to pull back the federal taxes on the amount, too. She later received a 1099 saying the amount was taken, but no taxes paid. She wants to know whether she is required to report the transaction?
12:36
Betty Lin-Fisher: We're a little more than halfway through our live chat. If you have questions, please post them and we will try to get to them.
12:37
CPA2: The distribution should be shown on line 16A of your 1040, but shown as non-taxable roll over, so the taxable amount on line 16B would be zero.
12:38
Betty Lin-Fisher: The CPAs are working on an addendum to that answer
12:40
Betty Lin-Fisher: If you missed it, the Beacon also had a story on Sunday about thousands of people who qualify for free tax preparation who shell out money to have it prepared.
12:42
Betty Lin-Fisher: Sorry, there was no addendum to the previous answer. We'll go the next question
12:42
Betty Lin-Fisher: A reader asked via email: his wife made a non deductible IRA contribution in 2008. He did not file a Form 8606 since it was not mentioned on Form 1040. Should he file an amended return to declare it? If so, does he need to submit a current Form 8606 and a note to explain?
12:43
Betty Lin-Fisher: As they are answering that question, I'll throw out a few fast facts here.
12:45
Betty Lin-Fisher: The filing deadline for taxes is Monday, April 15th. In previous years, we've had a few extra days as the 15th fell on a weekend or was delayed by a holiday in the nation's capital that was observed by the IRS. Ohio taxes are also due on April 15 and most municipalities also follow the federal deadlines.
12:45
CPA2: The three year statute of limitations has passed, so filing an amended return is not an option. However, the IRS has indicated that if you fail to file a form 8606 for any year that you can file a late 8606 for that year (withhout an amended return). There may be a late filing penalty assessed, but the IRS has the ability to waive it if there was reasonable cause for not filing.
12:45
Betty Lin-Fisher: You can get a six-month extension to Oct. 15th by filling out Form 4868 by April 15th. You will owe interest on any taxes not paid by April 15th.
12:46
Betty Lin-Fisher: Here's a new question, also regarding a situation surrounding a divorce:
12:46
Comment From i my divorce was final dec.27,was having money taken out because of what the ex made I will be filing single this year and Iam on disability income is only 13,500 for the year what do you suggest
12:49
Betty Lin-Fisher: As they are working on that story, we'll go to another: Glenna asks via email: In Nov. 2011, her husband rolled his traditional IRA into a Roth and they paid taxes on their 2011 tax return on the amount rolled over less the cost basis. Due to their income level, they cannot take any deductions on their IRA contributions and they intend to make their 2012 contribution $6,000 each. Hers would be an additional contribution to her existing traditional IRA. Her husband’s would be in a non-interest bearing account for a week and then rolled over to his exiting Roth. In reading IRS publications, she sees that a rollover is possible, but that if it is rolled from a Traditional IRA to a Roth IRA, it must be included in income. Is it just the interest or the full $6,000?
12:51
CPA2: Any taxes you had withheld from your income you should be able to claim credit for on your 2012 tax return, unless your divorce decree specifically allocates the credit for taxes paid. Therefore, when you file a your return it will likely result in a refund since your tax liability will be lower than expected.
12:51
Betty Lin-Fisher: Here's the next question:
12:51
Comment From Your Name If my child meets all the 5 tests to be a "qualifying child", MUST I claim her as a dependent, or do we have a choice of whether she claims herself?
12:51
Betty Lin-Fisher: Here's the answer from CPAs to the question from Glenna regarding the IRAs: It is not taxable since it was a non-deductible contribution.
Because it was nondeductible to begin with, your basis is still the $6,000 amount. When you roll it over, it would only be any income that would have accumulated in that one week period. If you put it in at $6,000 and it stayed at $6,000 - no income to report. If you put it in at $6,000 and its worth $6001, you would pay tax on the one dollar.
12:52
Betty Lin-Fisher: Here's another question:
12:52
Comment From ashley Last year my husband & I filed together.. and due to him owing money.. 86,000 because of a foreclosed home from before we were married... the goverment took it. this year i filed seperately. is there any chance they will take that knowing we are married?
12:52
Betty Lin-Fisher: People are coming in under the wire! Here's another question :)
12:52
Comment From Your Name Simple question. My 19 year old son who attends college fulltime had a summer job where he earned $2800. He is claimed on our (his parents)tax return. And yes, we filed for the American Op tax credit.
12:53
Betty Lin-Fisher: On the 19-year-old question -- sorry, what is the question?
12:55
Comment From Your Name My 19 year old son - who is a qualifying dependent and attends college full-time - had a summer job where he earned $2800. He was claim as a dependent on his parents tax return. And yes, we took the American Op tax credit. When my sons files his tax return, can he take the standard deduction (I know he cannot take an exemption since we claim him on our tax return.)
12:56
CPA1: Ashley on the foreclosure question:
Who is owed money? Is it to the IRS for prior year taxes owed?
12:58
Comment From ashley
no, he had a house loan... it was some kind of special country farm loan (before we were together).. the house was bought for 102,000 in 206 and it sold for 79,000 in 2009 during foreclosurer...
12:59
CPA3: On the 19-year-old question-- Yes he will get a standard deduction on his income. It will be limited based on the amount of earned income her received in the year.
12:59
Comment From ashley
and somehow that was turned over to the IRS, we assumed it was because it was some kind of Federal grant loan type deal?
12:59
Comment From i
thankyou for your help
12:59
Betty Lin-Fisher: We are almost out of time: here's one more:
12:59
Comment From dm I received a 1099-R for a lump sum pension distribution, but it does not show my contributions to the pension. I have a letter from the company showing my contributions. My tax software wants to show the gross distribution as taxable, but my contributions are not taxable. How do I handle this? Thanks.
1:01
Betty Lin-Fisher: We are out of time, but we're going to finish the ones outstanding. Thank you all for joining us and a transcript of this chat will be right on this story on www.ohio.com
1:02
Betty Lin-Fisher: A.R. asks via email: his wife died Dec. 7th. Can he still claim her as a dependent on his 2012 return? Does he file a joint return?
1:03
Betty Lin-Fisher: Here's the answer to the question about the wife you passed away from CPAs: Yes, can still claim as a dependent. Yes, still file a joint return. You need to report income from 1-1-12 until date of death on the return. If there's a filing requirement, estate income is reported on Form 1041. You might need to consult an attorney to see if you should choose fiscal or calendar year. Then income would be reported from date of death through fiscal/calendar year.
1:03
Betty Lin-Fisher: we still have two outstanding answers and the CPAs are typing now and then we'll end. Thanks for joining us.
1:05
CPA1:
DM 1099-R question:
I am not sure what software you are using. But the 1099-R should specify if the entire amount is taxable or the taxable amount is not determined. If you know what the non-taxable amount should be you can try to enter it somewhere in the software to show that but not being familar with the software you are using I cannot help with that. But you are correct and it sounds like you have support for the non-taxable amount so I would try to get the software to report the non-taxable amount and keep the letter from the company as support.
1:05
CPA2:
Ashley - filing separately will relieve the spouse of any legal and financial responsibility related to that spouse's separately filed tax return. I am not sure if this protection extends to leins and other outstanding debts that are not income tax related. Filing separately may reduce the risk of having the refund taken, but I don't know for sure if it will prohibit this.
1:05
Betty Lin-Fisher: Again, a reminder -- if you didn't get a chance to ask questions here or have more questions, you can call our Free Tax Call-In programs. Tomorrow (Wednesday) from 6-8 p.m. and Saturday, Feb. 16th from 9 a.m. to noon. Call 330-996-3644. If you get a recording when you call, hang up and call again as we do not check messages. Thanks.
1:06
Betty Lin-Fisher: Thank you to our CPAs for joining us today and to our readers for submitting questions. Have a great day!
