personal income tax question

[casinoboy3]

not sure who to ask, maybe someone here could help me....

I was an intern this past summer and made about 6k, none of which was withheld. I figured that after the standard deduction, I might owe around 50-100 bucks in federal income tax on this amount. But I just found out that I'll be receiving a 1099-MISC for the 6k I earned this summer.... So my question, do I have to worry about that self-employment tax... at 15.3% that means I'll owe around $900. I didn't save any receipts from this summer, most of my gas/groceries purchases are all on credit card statements though. But I really can't "prove" those expenses are "business related". Housing did cost me $1200, so I'm thinking I can deduct this, but I'll still end up owing quite a bit more than I expected...

Lastly, will this effect the 4k I contributed to my roth IRA this year? Because if I write off those "business expenses" my earnings this year will be below 4k.

Thanks

[New-born baby]

not sure who to ask, maybe someone here could help me....

I was an intern this past summer and made about 6k, none of which was withheld. I figured that after the standard deduction, I might owe around 50-100 bucks in federal income tax on this amount. But I just found out that I'll be receiving a 1099-MISC for the 6k I earned this summer.... So my question, do I have to worry about that self-employment tax... at 15.3% that means I'll owe around $900. I didn't save any receipts from this summer, most of my gas/groceries purchases are all on credit card statements though. But I really can't "prove" those expenses are "business related". Housing did cost me $1200, so I'm thinking I can deduct this, but I'll still end up owing quite a bit more than I expected...

Lastly, will this effect the 4k I contributed to my roth IRA this year? Because if I write off those "business expenses" my earnings this year will be below 4k.

Thanks

CasinoBoy,
I cannot answer all of your questions, but I can answer this one: if you made more than $400, then all off your income is subject to the FICA tax of 15.3%. So whatever legitimate expenses you have, you should take them off the $6k, because that will reduce your federal, state and FICA tax burden. FICA taxes are almost impossible to reduce. Once you take off your legitimate expenses, generally, you are going to pay.

About your housing expenses, unless you are a preacher, ("Casino Boy" doesn't sound like a good name for a preacher), I do not think you can deduct them. Neither do I think you'll be able to deduct your food expenses. The IRS figures that you would have to eat and sleep even if you didn't work. The milage incurred in your line of work is deductible, but not your commute to and from work. (And by the way, if you are ever faced with the choice of taking actual expenses, or the standard milage deduction, always take the standard milage deduction. Because if you ever start taking actual expenses, you must stay with that formula, and furthermore, you'll be ahead to take the standard milage deduction. The milage deduction is .405 per mile for miles incurred January through September, and .485 per mile from October through December.

Best to you,

[casinoboy3]

Thank you very much the info.
So as long as I'm getting a 1099-MISC, there's no question I'm subject to the FICA tax? If temporary housing/the commute aren't legitimate expenses, I guess I don't have then. This sucks. MM I hope you come up with some more good stock picks, and fast!

[New-born baby]

Thank you very much the info.
So as long as I'm getting a 1099-MISC, there's no question I'm subject to the FICA tax? If temporary housing/the commute aren't legitimate expenses, I guess I don't have then. This sucks. MM I hope you come up with some more good stock picks, and fast!

Yes, Casino Boy,you are subject to the FICA tax for all income. Now if you had to buy supplies for your job, these are deductible. And since they gave you a 1099, then you can file that you ran your own business. I suggest you go to the library and look at a tax filing book (e.g. Kepplinger's Income Tax Guide) and note the possible deductions you may take. This may reduce your taxable income.

[DSteckler]

As a general rule, unreimbursed employee business expenses are deductible only as miscellaneous itemized deductions and the deduction is subject to a 2% adjusted gross income floor. That means the expenses are not deductible unless: a) you're itemizing deductions (as opposed to taking the standard deduction), and b) the expenses exceed 2% of your adjusted gross income.

Odds are your business expenses will not be deductible.

[IIC]

Well, Casino Boy...Not that I'm officially recommending that you do this...but file an extension...then you'll have till August 15th (or 17th this year)to file...Don't send any money in August when you file...then they will bill you and you'll have till about September 15th to pay up. You won't have any late filing fees but you will be charged a late payment penalty which on $900 will only be about $25.

Take that money and invest it till you finally have to pay up...You should be able to earn a lot more than 25 bux on that money...That's what I do anyway...Doug(IIC)

[DSteckler]

<< but file an extension...then you'll have till August 15th (or 17th this year)to file...Don't send any money in August when you file...then they will bill you and you'll have till about September 15th to pay up. >>

The extension is only for filing the return, not for paying taxes. Filing extensions can be made without making tax payments if you properly estimate your tax liability on the form. If the amount of tax included with the extension request is less than sufficient to cover your tax liability, you will be charged interest on the overdue amount.

No late-payment penalty will be imposed if the tax paid through withholdings, estimated tax payents, etc., is at least 90% of the total tax due.

I suggest a visit to an accountant or tax advisor rather than relying on what you read on a message board. Unless you know the poster is qualified to give tax advise, you run the risk of running afoul of the IRS.

[IIC]

<< but file an extension...then you'll have till August 15th (or 17th this year)to file...Don't send any money in August when you file...then they will bill you and you'll have till about September 15th to pay up. >>

The extension is only for filing the return, not for paying taxes. Filing extensions can be made without making tax payments if you properly estimate your tax liability on the form. If the amount of tax included with the extension request is less than sufficient to cover your tax liability, you will be charged interest on the overdue amount.

No late-payment penalty will be imposed if the tax paid through withholdings, estimated tax payents, etc., is at least 90% of the total tax due.

I suggest a visit to an accountant or tax advisor rather than relying on what you read on a message board. Unless you know the poster is qualified to give tax advise, you run the risk of running afoul of the IRS.

Dave...read my message again...Didn't I say I was not "Officially" recommending that he do that? And didn't I say that there would be a late payment penalty?...Which is only 6% a year...Heck, if I can't make 6% on the money I might as well give up(of course there are taxes on that too)...Although there is another penalty if you under withhold by a certain amount...But that can be based on your previous year's tax liability too...which in this case we don't know.

And come to think of it...If you are in business for yourself oftentimes you are required to file quarterly estimates or more often.

But in this case, I'd hardly suggest that he pay $300 to an accountant for a $900 question.

Better advice would be to go to http://irs.gov or even call the IRS...I've always found the IRS very easy to deal with. Now the State of California is a bit more difficult...I've found that going in person works much better with them.

BTW...Welcome to the Forum...Been a while...I'm sure I'll enjoy debating with you...Doug(IIC)

[skiracer]

As long as you file for an extension on or before the April 15 deadline you will get an extension until June 15. Then you must refile for another extension until August 15. You can refile for another extension until Oct. 15 but that is the end of the extensions for that filing year. If you are supposed to be paying estimated taxes, self-employed etc., and you don't send in the required estimated taxes you will be charged with late payment penalities and interest on the taxes you owe and the penalities an interest charges will increase until the date you file on, whichever one of those dates it is that you eventually do file on.
After the last deadline of Oct. 15 you must file or they will place a lien and go after a judgement. They can also attach your bank accounts and wages or paychecks, or whatever other monies you have that they can find after Oct. 15 if you haven't filed by then.
I never file until the Oct. 15 deadline an there were years, along time ago, where my cash flows had been severely interrupted, an I would miss the Oct. 15 deadline and went through some of the things I mentioned above about the liens and attachments. Through any of those periods I always called the IRS and explained up front my situation and although they always did what they were required to do by law they were always congenial and helpful in seeing me through my difficulties an arranging an equitable payment schedule that I could live with. They want their money but know they cannot get blood out of a rock unless you try to beat them out of it.
If you're not against paying the penalties an interest, for whatever reasons, then as long as you file by the last Oct. 15 deadline there is no problemo.
If you think that you can use the money you owe them to earn more money you might want to reconsider that plan as in a sense that's a gamble and you problably could end up losing that an oweing them the back taxes on top of that.

[DSteckler]

Doug, the penalty can be as high as 20% plus interest, depending upon the IRS' characterization of the late payment. That's why anyone seeking advice on tax payment issues should consult with a tax advisor (CPA, tax attorney, H&R Block, etc.) rather than counting on getting proper advice from a message board.

[IIC]

Ski...I never heard of a June 15th deadline. I just looked at my last year's extension and it says 4 mos. And now I just looked at the IRS site and see that for 2005 they changed it to 6 months.

http://www.irs.gov/pub/irs-pdf/f4868.pdf

But you are right...They are real tough when you don't file by the extension date...But I went through the same type of thing many years ago when I owned a business...They worked out a very nice 3 yr payment plan for me...and when I had problems the next year they extended it...although they raised the required payment amount...And even when I could easily afford to pay the whole thing off I just continued with the payment plan...never showed up on my credit record either.

I guess times could have changed since then since it was a long time ago...But I doubt anyone's going to jail for 900 bux...Doug(IIC)

[IIC]

Ski...I never heard of a June 15th deadline. I just looked at my last year's extension and it says 4 mos. And now I just looked at the IRS site and see that for 2005 they changed it to 6 months.

http://www.irs.gov/pub/irs-pdf/f4868.pdf

But you are right...They are real tough when you don't file by the extension date...But I went through the same type of thing many years ago when I owned a business...They worked out a very nice 3 yr payment plan for me...and when I had problems the next year they extended it...although they raised the required payment amount...And even when I could easily afford to pay the whole thing off I just continued with the payment plan...never showed up on my credit record either.

I guess times could have changed since then since it was a long time ago...But I doubt anyone's going to jail for 900 bux...Doug(IIC)

Now come to think of it...June 15th does sound familiar for businesses...But I'm too lazy to check that right now

[skiracer]

Ski...I never heard of a June 15th deadline. I just looked at my last year's extension and it says 4 mos. And now I just looked at the IRS site and see that for 2005 they changed it to 6 months.

http://www.irs.gov/pub/irs-pdf/f4868.pdf

But you are right...They are real tough when you don't file by the extension date...But I went through the same type of thing many years ago when I owned a business...They worked out a very nice 3 yr payment plan for me...and when I had problems the next year they extended it...although they raised the required payment amount...And even when I could easily afford to pay the whole thing off I just continued with the payment plan...never showed up on my credit record either.

I guess times could have changed since then since it was a long time ago...But I doubt anyone's going to jail for 900 bux...Doug(IIC)

Doug,
I go through it every year with them. I never file before Oct. 15 and always go a a schedule with them, so I'm making a payment every month regardless. It's just that I'm always almost a year behind. I never start the new schedule before Jan. 1 of the filing year an usually finish paying off last years taxes around July/August of the following year and then I'm 4 or 5 mos. past that years April 15 filing date. Nuts but that's how I,ve been doing it for the past 28 years.

[IIC]

Here is a brief synopsis from the IRS site on penalties:

http://www.irs.gov/faqs/faq-kw136.html

[skiracer]

Here is a brief synopsis from the IRS site on penalties:

http://www.irs.gov/faqs/faq-kw136.html
Doug,
You are a website genius! If there is one available you've got it pegged.

[IIC]

Well...I guess we've run this into the ground...My final answer is that I think Casino Boy should call the IRS, explain the circumstances and ask them what he should do...Make sure to document the time, date and who he spoke to in case they give him the wrong answer...That way if the answer ends up being wrong (which has never happened to me...but I guess it does happen) he will still owe any taxes due as a result of the mis-info if they catch it (although for this amount of money my "Unofficial" opinion is that there is more chance of winning the Super Lotto than catching any mistake)...but they would waive any penalties associated with filing according to the wrong answer...I don't think they'll do that if some hotshot $300 an hour CPA gives you the wrong advice.

IMHO...The main things the IRS are after are not filing and fraud...And I don't suggest anyone to do either.

Now, back to the markets...Doug(IIC)

[casinoboy3]

Yes, I'm definately going to give the IRS a call and ask them what to do. I can't wait too long to file taxes and hope to have it done by February, as I need to list numbers from my tax return on financial aid forms for college. I suppose I could file an extension, but I don't really like the idea of gambling with the money that I'm gonna owe someone in the near future.

I tried looking up some info about my specific circumstance though, and here's what I came up with. I don't think there's any way to avoid paying the FICA tax on my income from the 1099, but I'm hoping there are a few deductions I can make.

According to this website:
http://www.jamesdance.com/Pages/foreigner_Living_Expenses.htm

"What are temporary living expenses?

Temporary living expenses are travel expenses incurred during an extended business trip or temporary work assignment that was intended to last one year or less. The expenses may only be claimed for a stay for business. Personal or school stay expenses generally are not deductible. Temporary living expenses also have no relation to having alien status. A U.S. citizen working temporarily in another city can also claim them. However, the time limitation of the visa makes it easier for a foreigner to claim that he is "away from home" on a business trip if he intends to work in the new location for less than a year. Temporary living expenses include hotel lodging (or apartment rent for longer stays), meals, and local transportation. Meals may be estimated using federal per diem rates. For example, the IRS allows $42 per day for a high cost locality (e.g., New York City). On the tax return, temporary living expenses are deducted as unreimbursed employee business expenses."

So basically it comes down to where is my tax home? If its my permanent residence or college location, then my summer housing and vehicle/transportation expenses would be deductible as the location is six hours away. But, the summer internship was my only "real" job this year, so if that place is considered my tax home, then I wouldn't be able to deduct the cost of housing.

And the second potential problem with this - where would the deduction be listed? I was under the impression that it would go on the Schedule C and this would directly reduce my "business" income, meaning I won't have to pay as much in total FICA taxes, and that my gross income might fall just under the standard deduction so I won't have to worry about the federal income tax either.

If, however, I can't list the deduction here, and I have to list it under "Unreimbursed employee business expenses" - then I'd have to itemize for this to be counted, but there's no way it's gonna total more then the standard deduction, meaning it would be pointless to pursue it.


Anyway thanks for the replies. By the way, I'm doing this all on Turbotax.

[skiracer]

Why don't you talk to an accountant? They are the ones who know the answers an all the in's an out's of the tax code an would be the one's able to get you the best situation for yourself. Trying to save yourself a few dollars always ends up worse than spending a few to get the best info.

[casinoboy3]

Why don't you talk to an accountant? They are the ones who know the answers an all the in's an out's of the tax code an would be the one's able to get you the best situation for yourself. Trying to save yourself a few dollars always ends up worse than spending a few to get the best info.

If may stop in one of those H&R Block's if that's what you mean... but first I'm going to ask around when I get back to school. I can't believe I'm the only one with a situation like this as it must be rather common among students who co-op.

[IIC]

If may stop in one of those H&R Block's if that's what you mean... but first I'm going to ask around when I get back to school. I can't believe I'm the only one with a situation like this as it must be rather common among students who co-op.

Well...asking H and R Block for tax advice is tantamount to asking "Joe Blow" at your local bank about IRA type advice....If they knew what they were doing...they wouldn't be working there...But that's just my opinion.

PLUS...On a related subject...any "Smart Investor should know this"...If you go to any major broker or bank...the drones that work there are ONLY allowed to suggest investments that their firm allows them to tell you about...Sure, they may be allowed to let you invest in something else...But ONLY if you initiate it...BUYER BEWARE!!!

Reminds me of someone I knew about 10 years ago...We had both joined a large Chamber of Commerce at the same time. She worked for one of the biggest Mutual Funds around...I got to know her somewhat...At the breakfast meeetings we were permitted to give a 2-3 min. speil about what we were offering...Her thing was a FREE Financial Analysis w/ recommendations for anyone.

Well...I wasn't born yesterday...I know how it works...So after about 4 months I took her aside and I told her that I know the game..."After giving someone a FREE financial analysis...Do you ever recommend that they invest in anything but your funds"??? End of story...She never spoke to me again...LOL

[skiracer]

Go to a private certified accountant and pay him whatever it is for an hour of his time to review your situation an advise you and perhaps do the work for you. It'll probably cost less that $75/$100.

[IIC]

Go to a private certified accountant and pay him whatever it is for an hour of his time to review your situation an advise you and perhaps do the work for you. It'll probably cost less that $75/$100.

Geez Ski...I'd certainly like to find a good accountant that was so cheap...Maybe I'm in LA-LA land...But I thought you have to pay at least $300 hr w/ a one hour minimum....Same amount for attorney's.

Maybe I'm getting screwed???

As far as my taxes...I do them myself...although last year since I did the Day trading thing I paid for an hr. of review to make sure I did that part right.

[DSteckler]

<< I'm in LA-LA land...But I thought you have to pay at least $300 hr w/ a one hour minimum >>

Only on the Left Coast <g>. Here in the heartland a good CPA charges half the much per hour, or less.

[skiracer]

Maybe I'm way off base as to what they get on the west coast. My guy who does all my work bills me an I just pay him. I never look at the total vs the hours spent on the work because he never gives me the total hours only the total bill. Maybe he's robbing me. I do pay him a big number every year.

[IIC]

Well...actually guys...I think my time is worth 500 bux an hour...unfortunately nobody else does...so I just toil away at a mere 300 bux an hour...LOL ;)