Ask an Accountant-IRA Rollovers

As we all know, it’s that dreaded time of the year-Tax time!  In honor of tax season, I have a new series called “Ask An Accountant”.  Send in your tax questions each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant.

Question:
How I want to handle my rollover..In 2010 I rolled over all the money from my  IRA (which started out as a 401K  )to a Roth IRA. Do I want to split the taxable amount between 2011 & 2012 or do I want put in the whole taxable amount this year & take the tax hit all this year?

Answer:
If you think you will be in a higher tax bracket next year, then take it all now. If it will not make that much of a difference, split it to get refunds in both years. In the end you will most likely pay the same amount of tax on those dollars, you just have the option of paying the tax over 1 year or 2. Personally, I would opt for 2 years…(why pay the IRS now if they are allowing you to pay later with no penalty) You control the use of the money, not the IRS. This can be a gamble if tax rates increase, but I don’t think that wil happen for a few years.
*Please keep in mind this post is for informational purposes only and answers given are very general.  Many things depend on individual circumstances.  Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

Ask An Accountant-Filing Extensions

As we all know, it’s that dreaded time of the year-Tax time!  In honor of tax season, I have a new series called “Ask An Accountant”.  Send in your tax questions each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant. 

Question:
I am way behind and know I will not have my stuff ready in time to file by the 15th.  What should I do?

Answer:
You will need to file an extension with the IRS. This is an automatic 6 month extension that is valid until October 15th.  Keep in mind this will only be an extension for time to file, not time to pay. What you will need to do to avoid underpayment penalty (under paying your taxes) is pay 90% of your previous year tax liability (in this case 2009).  For example if your total tax liability for 2009 was $10,000-90% of that would be $9,000.  That’s what you would have to pay in.  However your withholding is included in that. So if you had $8,000 withheld that same year, you would need to pay in $1,000 to make it to the $9,000 of your liability.

*Please keep in mind this post is for informational purposes only and answers given are very general.  Many things depend on individual circumstances.  Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

Ask An Accountant-Home Business and Winning Giveaways

As we all know, it’s that dreaded time of the year-Tax time!  In honor of tax season, I have a new series called “Ask An Accountant”.  Send in your tax questions each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant. 

Question:
 I keep hearing that as a person who enters giveaways you have to file taxes on the prizes that you win (no matter the value).  Is this true? Do you claim the prizes as income and as a new blogger I haven’t earned any income yet, but I sometimes work out of my home just doing hair with no chemicals (more of a stylist because I work with dreads).  How do I claim this as an income or can I and if so: Do I estimate my earnings and will this hurt me because I haven’t paid any taxes but earned income (plus I am a mom of 4).

Answer:
While most people are aware they must include wages, salaries, interest, dividends, tips and commissions as income on their tax returns, many don’t realize that they must also report most other income, such as:

  • cash earned from side jobs,
  • barter exchanges of goods or services,
  • awards, prizes, contest winnings and
  • gambling proceeds.

You would normally include these as miscellaneous income on your tax return, not subject to self-employment tax. 

 For the hair business, that income would be reported as a Schedule C (Profit From Business).  I would also suggest you get yourself a separate business license and an EIN for each of these ventures ASAP.   This will generate additional taxable income as well as “self-employment” tax which is an additional tax (estimated to be around 14%) on the profits from these activities.  So for every $100 dollars in profit you should expect to pay  $14 in self employment tax.   Avoid “estimating” as the use of whole round numbers sends a red flag to the IRS that you may be estimating the figures and they may ask for substantiation of these figures.

As an accountant that has Hair Salon clients, I would say there must be some basic supplies you need to operate (combs, brushes, scissors, clippers, water bottles, clips, aprons, as well as Home Office expenses (for the portion of your home used exclusively for hair styling) such as a portion of the electricity, water, mortgage interest/rent, taxes, etc…  All of these can be deductible items for you business.

*Please keep in mind this post is for informational purposes only and answers given are very general.  Many things depend on individual circumstances.  Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

Ask An Accountant-Blogger Tax Questions

As we all know, it’s that dreaded time of the year-Tax time!  In honor of tax season, I have a new series called “Ask An Accountant”.  Send in your tax questions each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant. 

Since I am a blogger and know how confusing tax time can be, I thought it would be appropriate to share some questions I have received from fellow bloggers this week. I inserted my name and blog name to keep the situation anonymous. Also, due to the number of blogger tax questions I have received,  I will be including 2 questions this week.

Question #1:
I’m a bit lost on the EIN and the company name thing and if I need to do it as a business or what…. I got an EIN but its for my name…do I need one for the blog? Do I need to get a business license? I know some have their blogs as corporations or LLC. ???

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Ask An Accountant

 

As we all know, it’s that dreaded time of the year-Tax time!  In honor of tax season, I have a new series called “Ask An Accountant”.  Send in your tax questions and each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant. 

Question:

We recently bought a manufactured home in 2010 (une).  We have a mortgage on the house, and have a 30 year land lease for the land that it is on.  can we claim the land lease on our taxes?  Several places i have read give me different answers, some say yes, others say no unless it is a lease to own, which it is not.  Any advice on how this plays into our taxes would be great appreciated!!

Answer:

If the lease payment is broken down by the lessor into principal and interest then you may deduct the interest just like a mortgage. This would typically be a situation where there is a lease to own with a small buyout at the end of the lease. If you are paying the taxes on the land you can deduct that. 

*Please keep in mind this post is for informational purposes only and answers given are very general.  Many things depend on individual circumstances.  Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org

Ask An Accountant

As we all know, it’s that dreaded time of the year-Tax time!  In honor of tax season, I have a new series called “Ask An Accountant”.  Send in your tax questions and each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant. 

Question:

I am a social worker and my job requires my personal car and cell phone for work use.  I track my mileage and keep all gas receipts; can I claim my car (gas and maintenancen) and my cell phone on my taxes?

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Ask An Accoutant-Return Timing

As we all know, it’s that dreaded time of the year-Tax time!  In honor of tax season, I have a new series called “Ask An Accoutant”.  Send in your tax questions and each week to momondeals@yahoo.com and I will post the question and give an answer from an experienced accountant. 

Question of the Week:

When will I see the money from my return?

Answer:

This is probably the most common question from individuals once they have filed their return.  Actually it is an easy question to answer-it varies with each person.  It generally takes 7-14 business days for the money to appear in your account after you have efiled.  You can also check the IRS website HERE to see exactly when yours will be deposited. You will need to input your social security number, filing status, and the exact dollar amount of your return. 

*Please keep in mind this post is for informational purposes only and answers given are very general.  Many things depend on individual circumstances.  Please contact your personal accountant or financial advisor for your particular situation.

photo credit: austinpost.org