can boyfriend claim all my children?

My boyfriend and i have lived together all year. I have 2 children from a previous marriage. I receive child support from my children's father. My boyfriend pays for shelter expenses, rent, electric, water etc. Use child support for the kids clothes, school activities and expenses and various other items for the kids. My boyfriend and i had a baby together this year as well. I was high risk for pregnancy so i worked very little. My income will be less than 3,500. I also received state medical and snap assistance. Could/ should my boyfriend claim all 3 kids?

Answer :

It depends; as long as you and your boyfriend meet a few requirements, he can claim the children as his dependents. However, if you qualify to file your own taxes( or your former husband can claim them as his dependents), you/ your former husband must claim the children since it's your/his biological offsprings. You may have to file your return even if your taxable income is zero as long as you have Federal income tax withheld in 2012? Or you are subject to tax refund form your previous return ort etc. In order for your boyfriend to claim your children and yo perhaps on his taxes, all of you need to meet a few requirements. First, you must have made $3,900 for 2013 or less for the year, thus qualifying as a dependent yourself. You and your children need to have lived with him for the full year, for example, all of 2013. Your boyfriend must have provided over 50 percent of the children's expenses, from food to medical care to shelter. Since the children can't care for themselves, these conditions are fairly easy to meet. SO, generally speaking, if your children can be claimed by another parent, like thir biological father, your boyfriend may not be able to claim the children on his tax return (he still may be able to claim you as his dependent on his return). However, if the father is not involved in the children's life -- and pays nothing to support the children -- and the all of you live together, and your boyfriend supports you and children, there's a chance he can claim your children and you on his tax return.

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Qualified IRA Distribution?

I rolled over an IRA indirectly into a pension plan to buy retirement time. Because it was indirect the retirement fund called it post tax & taxable. The IRS has sent me a bill for early withdrawal. Any ideas?

Answer :

An indirect rollover has more regulations, because the money goes through you, the IRA owner. Moving assets from one qualified retirement plan to another can be done either through a transfer or rollover. Indirect rollovers, where a check is sent to the IRA owner, tend to be faster but have more risk of being assessed penalties if the IRA owner does not satisfy the requirements in a proper or timely fashion. The IRS provides an IRA owner a 60-day window to complete an indirect rollover. If the rollover is not completed within this time frame, the IRS treats the rollover as a complete distribution. As such, the entire balance of the IRA is added to ordinary income. As long as you are under age 59 ½, there is also a 10 percent tax penalty assessed on the assets. The 60 days starts the day you receive the distribution from the existing IRA custodian. The 10% additional tax on early withdrawals from an IRA would not be a deductible expense because it is a federal tax.

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Large One-time Capital Gain

1 : We wanted to know if there was a chance that in the 2013 tax year we could have between $200,000 to $1,000,000 in capital gains from sales of securities (held short-term), if there were anything we could do in advance (I already purchased the securities in question in my personal brokerage account this year, but haven't yet sold them) to minimize taxes on the gains, short of selling them in 2014 or later, or do I just have to pay capital gains tax at the maximum rate.

2 : We heard that we might get a lower tax bill if we completed the AMT form, but we are unsure. We file a joint return (My wife and I are in our 40s - 50s and we have 4 children, only 1 of which is still under 17 years old) and my wife and I will have about $57,000 in salary income in 2013.

3 : Please advise whether we should use the regular (or high income) 1040 tax tables with whatever gain figures come from Schedule D or possibly use another method to compute our tax liability to save us more money.

Answer :

1 : When you sell a capital asset like a stock or a home you own, the difference between the amount you sell it for and what you paid for it , cost basis, is classified as a capital gain or a capital loss. Capital gains and losses are further classified as long-term or short-term, depending on how long you held the investment before you sold it. As you held the securities for one year or less, your capital gain or loss is considered short-term. Based on the duration of asset ownership and the tax filers personal tax rate, we can calculate their capital gains tax rate. For 2012 this is shown in the table below. In 2013, Short term gains will be taxed at 2013 marginal tax rate levels. Short-term capital gains tax like ordinary income at tax rates up to 35% for 2012 (and 39,6% in 2013). You could hold the options for a year or more so that they qualify as long term gains. You could sell other things , capital assets , at a loss so that your total net capital gain for the year is reduced to offset the losses. OR you can give your assets to your child as a gift; the IRS offers taxpayers a golden opportunity to give substantial and meaningful gifts up to $14K for 2013 I guess annually (or $28K if you give jointly with your spouse). In this case, you do not need to file gift tax return form 709 UNLESS the amount of the gift exceeds $14K for 2013.Even if you need to file form 709, UNLESS the total amount of your gifts (or cumulative amount) doesn’t exceeds $5.25 million for 2013, you do not need to pay any tax money on the gift.

2 : On the contrary, as long as you are subject to AMT, this means that you need to pay more tax to the IRS as AMT=TMT-Reg tax liability; The AMT is an extra tax some people have to pay on top of the regular income tax. The original idea behind this tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax.

3 : Once you determine whether your gain or loss is short-term or long-term, it's time to enter the transaction specifics in the appropriate section of Form 8949. All transactions require the same information, entered in either Part 1 (short term) or Part 2 (long term), in the appropriate alphabetically designated column. For most transactions, you'll complete: The name or description of the asset you sold. When you obtained it. When you sold it. What price you sold it for. The asset's cost or other basis. You need to total your entries on Form 8949 and then transfer the information to the appropriate short-term or long-term sections of Sch D and 1040 line. You need to complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 44 On that tax schedule you'll subtract your basis from the sales price to arrive at your capital gain or loss.

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Not a divorce - but question on IRS reporting requirements home equity split

I have a question regarding whether I should be filing any documents with the IRS on a personal asset split done because of the ending of a relationship. I purchased a home for $205,000, deeded in my name. Two years later I put my girlfriends name on the deed – she did not pay any money to me. During the course of the next 8 years we lived together and split the home expenses, including the monthly mortgage payments equally, with her paying me a single monthly payment for her share of those expenses. She also paid directly for large improvements to the home – like $13,000 for a porch, $10,000 for remodeling the basement – in these situations she paid for the materials and I did the work myself. About 3 years into the relationship I did a mortgage refinance for a major improvement (pool installation) – at that time the new mortgage was signed as me being the primary and her as a co-signer.

When the relationship ended we agreed that I would buy her out of the home based on a professional real estate appraiser's value less the current mortgage – IE… the equity position of the home. The home’s value was estimated at $326,000 and the current mortgage was $210,000 creating and equity position of $116,000. I proceed to refinance the home removing her name from the mortgage, we redid the deed removing her name from it and giving me sole ownership. I paid her half the equity in the home $58,000 less an agreed upon value of $12,240 for an engagement ring – (she kept the ring). My lump sum cash payment to her was $45,760. An agreement outlining all of this was written up by our attorneys in a separation agreement – then signed and notarized. My payment of $45,760 was made in January 2013. My question is should I be filing anything with the IRS to report this payment? Also does my cost basis for this home change if I were to sell it in the future?

Answer :

1 : It depends. When you sold your main home and made a profit, you may be able to exclude that profit from your taxable income. TO EXCLUDE GAIN ON THE DISPOSITION OF A HOME from income under IRC section 121, you must own and occupy the property as a principal residence for two of the five years immediately before the sale. However, the ownership and occupancy need not be concurrent. The law permits a maximum gain exclusion of $250K for MFS ($500K for certain married taxpayers). In other words, the home must have been your principal residence. You can ALSO exclude a portion of your gain if you are selling your home and lived there less than 2 years and you meet one of the three exceptions; Change in the Location of Your Job ; Health Concerns; Unforeseen Circumstances.

You calculate your partial exclusion based on the amount of time you actually lived in your home.

Count the number of months you actually lived in your home. Then divide that number by 24. Then multiply this ratio by $250K (if unmarried) or by $500K (if married). The result is the amount of gain you can exclude from your taxable income. For example: you lived in your home for 12 months, and then sold the home because your employer asked you to relocate to a different office. You are an unmarried person. You calculate your partial exclusion: 12 months divided by 24 months (for a ratio of .50) times your maximum exclusion of $250K; you can exclude up to $125K in gain. If your gain is more than $125K, you include only the amount over $125K as taxable income on Sch D/Form8949. If your gain is less than $125K , then your gain can be excluded from your taxable income. 

You cannot deduct a loss from the sale of your main home any loss on the Sale of a Home. 

NOTE : When you sell your primary residence, you can make up to $250K as mentioned above, on the sale and keep it -- tax free. There is no reporting requirement to the IRS and no capital gains up to $250K.

2 : Yes; you need to calculate your Cost basis and CG. Just like calculating capital gains, the formula for calculating the gain or loss involves subtracting your cost basis from your selling price.The formula for calculating your cost basis on your main home is ;Purchase price + Purchase costs (title & escrow fees, real estate agent commissions, etc.) + Improvements (replacing the roof, new furnace, etc.) + Selling costs (title & escrow fees, real estate agent commissions, etc.) = Cost Basis and I guess you need topslit it out between you and your GF. And then calculate your profit or loss would be; Selling price - Cost Basis including selling costs or its = Gain or Loss

If the resulting number is positive, you made a profit when you sold your home. If the resulting number is negative, you incurred a loss. 

Finally, you also need to calculate your taxable gain:Gain - Maximum or Partial Exclusion , $250K as said above as long the pty was primary residence = Taxable Gain

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Property tax issue is process

In 1996, I had a property assess question in which I demonstrated my case and my valuation was diminished by essentially $30,000 through a decrease process.

I have battled with the appraisal term "comparables" for 20 years in light of the fact that they aren't working nor are they reasonable.

I have a $300,000 home and authorities benchmark me, utilizing the expression "comparables," to homes esteemed as high as $900,000 with double the rooms and twofold the amount of showers.

These are illustrations of what needs altering in property imposes by our Legislature.

The point when will the Legislature get it that it can't alter property assesses by sponsoring them? Lawmakers need to continue tossing cash at it through schools or some neighborhood government unit. The point when will they at any point get that the issue with property charges is the "procedure."

The evaluation process is broken; the entire foundation and equation for property expenses is broken. We require add up to change of property charges.

The Legislature is doing nothing to address property charges that will stop the center issue, which is the equation and the appraisal procedure. So the center issue, which is exemplified by my 1996 issue and can happen yet today, will at present be there after this session — once more. The Legislature didn't hear us once more.

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bartering or not? living arrangement question

1 : Was this arrangement a "barter" arrangement and do I need to file taxes for the room / use of the house as a residence? Keep in mind this was also my office.

2 : If I do have to amend my tax returns and disclose any of this as income, do I need to have my former "employer" also agree that the income was paid or that a barter relationship existed?

3 : If he feels that I am wrong, can he challenge me in court?

4 : I don't want to start trouble for anyone here, but I just want to know what my options are. I never realized this could possibly be construed as something I might have to pay tax on.

Answer :

1 : Yes I guess so; as you said,”I was not paying rent any more, and I was also doing work at the office in the morning for which I was not paid cash for.”; The IRS wants to remind TPs that bartering transactions generally have associated tax reporting, accounting and recordkeeping responsibilities. The FMV of property or services received through barter is taxable income.As s self employer, a contractor, NOT an EE, as you can see, you need to file your return as long as the amount on line 29/ 31 is $400 or exceeds $400 on Sch C and also need to pay SECA taxes as long as the amount on line 2/ 3 on Sch SE is also $400 or exceeds $400; ALSO,
If you are filing as a sole proprietor, partner, S corp shareholder, and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. however, You do not have to pay estimated tax for the current year if you had no tax liability for the prior year ; You were a U.S. citizen or resident for the whole year;Your prior tax year covered a 12 month period

2 : I guess you can do that UNLESS he understands the transaction; you can let him it is a barter transaction between you and him.
 

3 : Actually not in court but he may contact the IRS for more accurate info in detail/ for sure. Bartering income is considered taxable revenue by the IRS.Anyway he also needs to report his barter income that you didn’t receive from him as you said,” you was also doing work at the office in the morning for which you were not paid cash for.”So fair rental value of the room was equivalent to the cash he had to pay you if you had not used the room for rent free.The cash that he had to pay you is his barter income that he needs to report on his return as taxable income since he didn’t pay you.

4 : No trouble at all; you won't start trouble for anyone here;both of you need to pay tax on your taxable baretering income as mentioned previously.

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Short Sale

Is the forgiveness of debt associated with a short sale exempt if you haven't lived in the short sale property for two years? The short sale property has been vacant, for sale for the past two years. Previous to that is was a primary residence for eight years.

Answer :

To qualify for the exemption, you must have lived in the home as your primary residence for at least two of the last five years before the sale. To meet this test, the years do not have to be consecutive. Debt forgiven on your primary residence is tax exempt, but you may have to file a form 982 with your tax return. If you plan to take advantage of the Mortgage Debt Relief Act, report the amount of debt forgiven on IRS Form 982 and attach it to your income taxes for the year in which the debt was forgiven.Ordinarily any debt forgiven is treated as income reported on line 21 of 1040. The Mortgage Forgiveness Debt Relief Act of 2007 makes the debt forgiven on your primary residence non-taxable through 2012. The 2007 Act generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief.This provision applies to debt forgiven in calendar years 2007 through 2012. The law was passed to help struggling homeowners get through the collapse of the housing boom, but it will expire after 2012 unless Congress renews it.Up to $2 M of forgiven debt is eligible for this exclusion ($1M if married filing separately). The exclusion doesn’t apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.The amount excluded reduces the taxpayer’s cost basis in the home.

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IRS Announces that 2014 Tax Season to Start Later Following Government Closure

Per the IRS "the Internal Revenue Service today announced a delay of approximately one to two weeks to the start of the 2014 filing season to allow adequate time to program and test tax processing systems following the 16-day federal government closure."

Apparently, "the IRS is exploring options to shorten the expected delay and will announce a final decision on the start of the 2014 filing season in December, Acting IRS Commissioner Danny Werfel said. The original start date of the 2014 filing season was Jan. 21, 2014 and with a one- to two-week delay, the IRS would start accepting and processing 2013 individual tax returns no earlier than Jan. 28, 2014 and no later than Feb. 4, 2014."

The IRS has said, that "the government closure came during the peak period for preparing IRS systems for the 2014 filing season. Programming, testing and deployment of more than 50 IRS systems is needed to handle processing of nearly 150 million tax returns. Updating these core systems is a complex, year-round process with the majority of the work beginning in the fall of each year. About 90 percent of IRS operations were closed during the shutdown, with some major workstreams closed entirely during this period, putting the IRS nearly three weeks behind its tight timetable for being ready to start the 2014 filing season. There are additional training, programming and testing demands on IRS systems this year in order to provide additional refund fraud and identity theft detection and prevention."

Per the IRS, “Readying our systems to handle the tax season is an intricate, detailed process, and we must take the time to get it right,” Werfel said. “The adjustment to the start of the filing season provides us the necessary time to program, test and validate our systems so that we can provide a smooth filing and refund process for the nation’s taxpayers. We want the public and tax professionals to know about the delay well in advance so they can prepare for a later start of the filing season.”

The IRS further announced that they "will not process paper tax returns before the start date, which will be announced in December. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit. The April 15 tax deadline is set by statute and will remain in place. However, the IRS reminds taxpayers that anyone can request an automatic six-month extension to file their tax return. The request is easily done with Form 4868, which can be filed electronically or on paper."

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Wrong SS on W2 So Taxes Withheld not accounted for

After submitting my personal returns to federal and state, I received an assessment from the state showing I owe a lot of $$$ and showing taxes withheld for 2012 as $0. I then checked my W2 which shows taxes withheld however I noticed a mistake in that my ss# was off by 1 digit.

I know I have to inform my employer and have him issue me a corrected W2C but do I send that to the IRS premptively? The W2C form online that I viewed seems to ask for it to be mailed to the SSA.

Answer :

You need to contact your company's payroll department to correct your SSN. Your employer will complete a W-2c form, which is a corrected W-2 form. This will be the form you will use to file your yearly income taxes. Your ER needs to complete the top portion of the W-2c if he is only changing the SSN or the name. If he is changing dollar amounts, he will complete the entire W-2c form. Your ER needs to file the W-2c form and a W-3c form with the SSA and give a copy to you. The W-2c and W-3c forms are similar to the original forms sent by your ER.SO, you should have your employer prepare and file Form W-2C (as in "Corrected") to eliminate the wages on the wrong number and add them to the correct one. Your Social Security earnings account won't be credited properly unless this is done. use the W-2C only and contact the SSA to ensure that your earnings were correctly reported. SO as long as If the corrected W-2, W2C, has a change in either box 1 or box 2, you need to file an amended return for the affected tax year since the missing income was reported in box 1, which could result in a higher tax liability for the tax year in question. NOTE:If the new form does change anything that you reported when you filed already, then you must file an amended return.Amended returns have to be paper mailed
You can ensure that your earnings were correctly reported by requesting a Social Security Statement report. This is something you might want to consider doing every few years anyway. You can request your report from the SSA web site.

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section 179 deduction

I bought an SUV for 55,000 in 5/2010 which qualified for this deduction. in 2010

I took a $25000 deduction (use was 73% business). In 2011 I took an $11,000 deduction and in 2012 I took a $6800 deduction. i now want to trade it in and get a new pickup truck with a 6.5 foot bed. This qualifies for the section 179 deduction without the 25,000 limit the suv has.

i can deduct the full $55,000 price tag of the truck on my taxes in 2013 but what will happen with the SUV i took the original section 179 deduction on?

I know there is a recapture but I understand that I can trade up with this new truck and exchange. What do you think the new deduction in 2013 will be?

Also, when will the original 5 years be up. Is it enough to use the truck in 2010, 2011, 2012, 2013 and a month in 2014?

Answer :

1 : As you can see, while many people don’t see much difference between a vehicle trade-in and a sale,however, it can make a huge difference tax-wise. Since you have depreciated via Section 179 + normal annual depreciation, the cost basis down to an amount much lower than the vehicle’s current FMV, a sale will trigger a taxable recapture of some or all of the depreciation and Sec. 179 as sec 1245 ordinary income . If you sell, exchange, or otherwise dispose of section 179 property, you may have to treat all or part of the gain as ordinary income.BUTAs long as you trade the vehicle in for one with a value of an equal or higher amount, there will be no taxable recapture. If you trade in your old SUV for a new SUV, you have a tax free like kind exchange. Your basis for depreciation for the new SUV is $12,200. With the like kind exchange, you will not have a recapture of the Section 179 deduction , $42,800, taken on the old SUV. If you don't trade in the old SUV and sell it privately, you won't have a tax free exchange. This means potentially you could expense the new SUV under Section 179 up to $55K. You would also need to compute the gain or loss on the sale of old SUV and pay tax on the recapture of the Section 179 taken on it. The tax rate on depreciation is recapture is 25%. Unless your tax savings on the 179 deduction was based on a 25% rate or greater, you are better off doing the trade in. Per Form 8824, the remaining undepreciated cost basis of the old vehicle, $12,200, plus any additional amounts paid via cash and debt will become the cost basis of the new vehicle.In regard to claiming Section 179 on the new vehicle, the rollover cost portion,$12,200, is not eligible; but the newly paid via cash or debt amounts are. Normal deprecation is available for the amount not deducted under Sec. 179.The opposite would be the case if the vehicle is worth less than the depreciated cost basis. A sale would enable a deductible loss; while a trade would require the loss to be rolled over and added to the cost basis of the new vehicle.

You need to check the asset’s depreciated cost basis , BV, before deciding whether to trade a vehicle in or sell it in an independent transaction.

2 : As mentioned above it depends on the situation,i.e, sale/exchange or trade in or etc.. For example, if you don't trade in the old SUV and sell it privately, you won't have a tax free exchange. This means potentially you could expense the new SUV under Section 179 up to $55K, newly/fully depreciable cost for sec179. In regard to claiming Section 179 on the new vehicle, the rollover cost portion,$12,200, is not eligible; but if you paid, then, the newly paid via cash or debt amounts are.

3 : I guess it is up on the date of the trade in. To compute the holding period of the property, you begin counting on the day after the date you acquired the property and stop counting on the day that you dispose of it. If you acquire new SUV in exchange for old SUV, such as in a tax-deferred exchange, the holding period begins on the day after the date the original (or old) SUV was acquired. 

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Taxes on Monthly income from Life Insurance Policy

I am planning on starting to draw a monthly income from a Life Insurance Policy that my father set up many years ago. It is an interesting first policy, so I will have to pay tax on the monthly amount. I can either have them take the tax amount out monthly from the amount as you would for payroll, or I can get the entire amount monthly, but will have to pay the tax when I file income taxes at the end of year

What would be my best option?

Answer :

I guess if I were in your shoes, then I’d pay the tax when I file income taxes at end of year.It’d be MUCH better offas long as your taxable income/taxable liability gets bigger. If you have them take the tax amount out monthly from the amount as you would for payroll, then this means , you’d pay tax on monthly income in advance and you’d lose cumulative interest income on each monthly tax payments paid in advance( you need to apply time value of money rule to estimate present value of monthly interest income accumulated on each monthly tax liability that yu pay in advance form Jan through November)On the contrary, if you get the entire amount monthly, but pay the tax when you file income taxes at end of year, then, this means you’d earn at least the cumulative interest income that yu’d lose as you pay tax in advance.

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Caregiver exemption subletting

Hi,

Thank you for taking the time to read this.

I am living in my mother's house in Massachusetts. I am on SSDI. I took care of my mother, who is now in a nursing home. Medicaid allowed the caregiver exemption that lets me stay in her house, pay all the bills (mortgage, taxes, utilities...) and keep her house out of the assets that Medicaid takes when someone goes into a nursing home.

I need to have someone move in to share expenses.

1. Is that taxable income?
2. If so, in what category?
3. Is there a limit on what I can take in, below the cost of the total household expenses?

Any additional information, tips or suggestions would also be appreciated.

Thank you again. 

Answer : 

1 : If you own the home, then the income you receive from renting out a part of the home must be reported on your tax return. The expenses for that part of the home can be deducted as an expense. These must be reported on the IRS 1040/ on Sch E of 1040;however, the owner of the house is your mother, and she lets you me stay in her house (you do not pay any fair market value of rent to your mother). If your mother requires you to live on the property in order to perform your job duties (on-site management of rental properties, caretakers, etc.), it is non-taxable to you performing your duty. So if you are maintaining the property, and it is "for your mother’s convenience" and the free rent is not taxable. UNLESS you are the owner of the house, it is not your rental income to be reported on your return. Otherwise, your mother must charge fair-market rent (taxable income to her).As long as your mother lets you someone move in to share expenses (and the tenant pays rent to you and you keep it), then, it is a gift, I guess, for you. As long as you get rent free occupancy without having to do anything, the transfer is gratuitous i.e. a gift. If you're receiving SSDI benefits and the SSA finds that you're engaged in work that it considers substantial it has the authority to require you to repay the benefit overpayment amounts and/or cancel your SSDI eligibility altogether. So you need to find out how a gift could affect your current benefits. You should know that disability benefits are not typically affected by extra income. This is because people become eligible by meeting all the criteria and also paying into the system for years through a job. Thus, they are usually able to receive cash gifts without affecting their case either way. The problem arises when you also receive Medicaid or SSI, as these programs do consider any additional income. I guess you need to contact SSA fro more accurate info in detail.

2 : As long as the free rent/rental income from a tenant(actually it is your mother’s rental income as she owns the house) is a gift, you , as a done, do not need to report it on your return.

3 : I guess you can check it with a r/e agent in your local area for property FMV of rent in the area.

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