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TaxMama s TaxQuips Non-Dependent Medical Costs

2014-12-09 by Eva Rosenberg

Feeling sick Today TaxMama® hears from Robert in the TaxQuips Forum, who has this interesting question. “A self-employed father has found himself having to cover thousands of dollars of uninsured medical expenses for his 21-year old daughter. He does not claim her as a dependent. The father has paid these expenses directly to the providers – and now, to their collection agencies. Also, may he deduct her insurance as part of his self-employed health insurance deduction?”

 

Hi Robert

Let’s see if we can address Dad’s issues. I will give you links to the relevant laws and information.

Starting with the Health Insurance. If Dad paid for daughter’s health insurance and she is under age 27, it certainly seems to me that he can deduct that health insurance as part of his self-employed health insurance costs. See IRC 162(l) .

 

Now, on to the medical expenses. Yes, you are allowed to claim the medical expenses of someone who would have qualified as a dependent, if not for their income. (note: I updated the amounts to reflect 2014 tax law in the citation I used in the TaxQuips Forum.)
And remember, you can find answers to all kinds of questions about medical expenses and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

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Clothing and Mileage

2014-11-17 by Eva Rosenberg

Nudity at work Today TaxMama® hears from Mike in the TaxQuips Forum, who has a common type of question. “I work in sales as an employee. May I itemize my clothing expenses and Mileage?”


Dear Mike,

First, let’s take the easy part of the question.

Clothing. You need to wear clothing in this society. We are not legally permitted to go around naked – much as we might like to. Besides, nudity might cost you sales. So, since you need to wear clothing anyway, there is no deduction for that.

Now, let’s look at mileage. The first thing you must do is to look at your company’s reimbursement policy for your mileage. If they reimburse salespeople, then you are required to submit your expense report to your company on a timely basis and get reimbursed.

If your expenses are higher than the company’s allowable reimbursements, track all your expenses. Track ALL your miles driven – total miles and business miles – and keep evidence of the mileage. (Note: Commuting miles are not deductible. That means, driving from home to office and back.)

Then you may use Form 2106 to report ALL your expenses. Deduct the reimbursements you receive from your company on line 7 of Form 2106.

Before you go to all this work to document and track your expenses, see if you can use itemized deductions in the first place. Typically, unless your unreimbursed expenses are over $10,000, and/or you own a home and pay mortgage interest…you might not have enough expenses to itemize. I know, it’s a shame, when it costs you so much to do your job.

Just in case, please read IRS Publication 463 for more details on business expenses
you can use, how to use them, and how to document the expenses.
And remember, you can find answers to all kinds of questions about job-related expenses and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

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TaxMama s TaxQuips Not A Temporary Job

2014-09-23 by Eva Rosenberg

Moving to Nevada Today TaxMama® hears from Dustin in the TaxQuips Forum, who has a very reasonable question. (Let me paraphrase.) “I live in Idaho and just got a construction job in Nevada that will last two years. My wife wants to stay in Idaho near her doctor during her pregnancy. What’s the best way to handle the state residency tax issues?”

 

Dear Dustin,

It appears that you are the principal earner in the family. Since this is clearly not a short-term project, you won’t be able to get the benefit of the travel expenses to a temporary job.

So, establish yourself as a Nevada resident and file your federal tax returns using the Nevada address. You can file a non-resident return in Idaho, with your wife as a resident.

Both Nevada and Idaho are community property states. So, on the Idaho tax return, your wife’s column must show half your income, relevant expenses and deductions.

Mike Reed, EA provides another suggestion. Call the insurance company and ask if there would be a problem if you and your wife live in Nevada and use the doctor in Idaho. After all they are neighboring States. A friend of his did something like this and it worked out just fine.

And remember, you can find answers to all kinds of questions about state tax filing and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

Download the MP3 (0:00min, 2MB) or listen now...

Ask TaxMama
Where Taxes are Fun
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Cash Donations

2014-08-19 by Eva Rosenberg

Cash donations Today TaxMama® hears from GuideForThePoor in the TaxQuips Forum, who has an interesting question. “Suppose your deductions are too low to itemize, but you still want to give money to charity. Can you give the money to a friend who does itemize – and have the friend donate it to charity and get the deduction?”

 

Dear Guide,

Sure, you are welcome to give your friend any amount of gift you like, up to $14,000 per year, without needing to file a gift tax return.

Your friend is welcome to give all, or part of it, or even more to any charity that you two select.

In fact, this is an excellent way to help charities.

I often advise people who are not in a position to itemize to give their money or household goods to someone who can use the deduction. Wise move.

Bill Porter, EA warns that once you make the gift to your friend, you have no control over that money. If they decide not to donate it, there’s nothing you can do – except not partner with that friend again.

Rita Lewis, EA suggests that if you are close to itemizing, you can use the bunching technique – making a larger donation every other year. Good thoughts from both Bill and Rita.

And remember, you can find answers to all kinds of questions about donations and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

 

Download the MP3 (0:00min, 2MB) or listen now...

Ask TaxMama
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TaxMama s TaxQuips BackDoor IRA

2014-07-08 by Eva Rosenberg

Back Door - IRA Today TaxMama® hears from ET in the TaxQuips Forum, who recently learned about Back Door Roth IRA contributions and wanted to know how they work.

 


Dear ET,

You’re reading articles about contributing to IRAs and then rolling things into a Roth.

What the articles don’t seem to tell you is – you don’t need to open a regular IRA at all.

You can take the $3,000 in your old Fidelity 401(k) and roll it directly into a Roth IRA.
(You don’t need that intermediate step.) Just do it as a trustee-to-trustee transfer.
Do NOT have it hit your own bank account at all.

What are the tax implications? You will pay tax on the $3,000, but no early withdrawal penalties. You must leave the money in there for at least 5 years, to avoid any early withdrawal penalty on the entire rollover.

Your implication is that you are earning too much to qualify for Roth contributions, is that the case? If not, make some contributions directly to a Roth IRA each year.

If you DO earn too much to contribute directly to a Roth, want to make contributions to a regular IRA each year. Then you can roll them over to a Roth and pay taxes on the entire balance, including earnings. Again, same rules apply – leave it there for 5 years.

If the contributions to the IRA are non-deductible (your income may be too high since you are covered by an employer plan), then you can roll over the money to a Roth IRA each year and only pay taxes on the earnings on that regular IRA.

It’s actually quite simple. As long as you leave the money in the Roth IRA for at least 5 years, you will get all the earnings tax-free when you ultimately retire. (Or there are ways to tap into it earlier…but that’s a whole other issue.)

 

And remember, you can find answers to all kinds of questions about Roth IRAs and other tax and business issues, free. Where? Where else? At www.TaxMama.com.

[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]

Please post all Comments and Replies in the new TaxQuips Forum .

Download the MP3 (0:00min, 3MB) or listen now...

Ask TaxMama
Where Taxes are Fun
TaxQuips
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TaxQuips Forum
Where you can you ask your tax questions
TaxQuips Forum
Where you can you can add your comments



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