[learning about] Taxes and deductions

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[learning about] Taxes and deductions

Postby Greg17 » Fri Feb 01, 2013 11:17 am

I've been reading a few topics here, and recently discovered there are some things that you can write off on your taxes I was previously unaware of. This is a bit troubling because I have paid a CPA to do my taxes the last two years and was not told about this.
I realize that having a solid knowledge going into it is my best approach.
So, my question is, where can I learn more about taxes and deductions. I do realize that the irs has information on their website, but some of it is not clear. Is there a book or blog that would be a good source of further information (backed by research on the irs website)?
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Re: [learning about] Taxes and deductions

Postby Gill » Fri Feb 01, 2013 12:39 pm

Try the publication by the IRS, Publication 17, "Your Federal Income Tax". Only a minority of taxpayers itemize their deductions, so it is entirely possibly you are not able to itemize and your CPA has been using the standard deduction.
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Re: [learning about] Taxes and deductions

Postby DSInvestor » Fri Feb 01, 2013 1:02 pm

Also take a look at Nolo Press:
http://www.nolo.com/legal-encyclopedia/taxes

Nolo Press Personal Tax Deductions and Tax Breaks:
http://www.nolo.com/legal-encyclopedia/ ... tax-breaks
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Re: [learning about] Taxes and deductions

Postby JW Nearly Retired » Fri Feb 01, 2013 1:29 pm

The big ones are mortgage interest, state/local/property taxes, and contributions to charity. Assume you knew about these.

There are also a whole mess of them that fall under a must-exceed-2%-of-AGI floor, and medical that must exceed 7.5%, before you can start to deduct them. These never reach the deductible level for me.

If you do your own taxes with tax software they will offer you a long menu of items that are potentially deductible.
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Re: [learning about] Taxes and deductions

Postby retiredjg » Fri Feb 01, 2013 1:53 pm

Welcome to the forum! I would not rush to judgement just yet. There could be a reason you didn't know about those things. And they may not apply to your situation.

I suggest Taxes for Dummies . This book can get you up to speed so that you can follow the IRS publications better. This does not happen overnight. It's a process. Even if you do use a CPA, it's good to have a basic understanding of how taxes work.
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Re: [learning about] Taxes and deductions

Postby jebmke » Fri Feb 01, 2013 2:19 pm

This training guide that we use in TaxAide is also a good resource. It covers many of the basics and has examples. I would suggest learning more than just "deductions." IMO, everyone should understand how their taxes work, even if they have them prepared by others. When the IRS comes after someone, he comes after you, not your preparer.

http://www.irs.gov/pub/irs-pdf/p4491.pdf
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Re: [learning about] Taxes and deductions

Postby Default User BR » Fri Feb 01, 2013 2:53 pm

Do you have some specific examples of ones that you think you've been missing out on? That will let us know how delinquent the CPA has been in reality.


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Re: [learning about] Taxes and deductions

Postby jared » Fri Feb 01, 2013 2:54 pm

Greg17 wrote:I've been reading a few topics here, and recently discovered there are some things that you can write off on your taxes I was previously unaware of.

Like what?
Greg17 wrote:This is a bit troubling because I have paid a CPA to do my taxes the last two years and was not told about this.

Did the CPA know you had these expenses?
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Re: [learning about] Taxes and deductions

Postby Gill » Fri Feb 01, 2013 3:00 pm

Did your CPA give you an "Organizer" to be used to accumulate your tax information? Most CPA's do this and the purpose is to stimulate the client to provide information on all types of income and deductions.
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Re: [learning about] Taxes and deductions

Postby Greg17 » Fri Feb 01, 2013 4:17 pm

Default User BR wrote:Do you have some specific examples of ones that you think you've been missing out on? That will let us know how delinquent the CPA has been in reality.


Brian



The biggest one I've found is education. However, there are other ones that may or may not have worked out for me, but I was never asked (example being military move).
I assume she simply put me in for a standard deduction without going too far in depth with other possible scenarios.
It is in the past, but I purchased my first home this year and know I can write off mortgage interest and property tax so I am reevaluating my taxes.

There is a lot to look into and thank you to everyone for the links.
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Re: [learning about] Taxes and deductions

Postby BL » Fri Feb 01, 2013 4:26 pm

"It is in the past, but I purchased my first home this year and know I can write off mortgage interest and property tax so I am reevaluating my taxes."

Good for you for learning about taxes.
I just wanted to say that it is not in the past; until 3 years from tax deadline, you can file an amended return if there are corrections to be made.

Having said that, if you didn't own a home, you probably wouldn't itemize. If you were reimbursed for something, it does not reduce taxes.
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Re: [learning about] Taxes and deductions

Postby LadyGeek » Fri Feb 01, 2013 4:28 pm

Greg17 wrote:... but I was never asked (example being military move).

Are you US military? There are a lot of things that you should know about. We have a number of members who can help you from that perspective.
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Re: [learning about] Taxes and deductions

Postby Greg17 » Fri Feb 01, 2013 4:32 pm

LadyGeek wrote:
Greg17 wrote:... but I was never asked (example being military move).

Are you US military? There are a lot of things that you should know about. We have a number of members who can help you from that perspective.


I was- I got out two years ago.
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Re: [learning about] Taxes and deductions

Postby livesoft » Fri Feb 01, 2013 4:34 pm

I think your best bet is to read the IRS Publications that pertain to the subject of interest. Just browse through the titles of the publications:
http://www.irs.gov/publications/index.html

Oh look, Publication 3 is titled "Armed Forces' Tax Guide"

Seriously, just browse the titles and click through to see the table of contents of say one or two of these a day while watching TV, then bookmark the ones you might want to read at a later date. They are easy to read and will really open your eyes.

Quiz time: Which IRS Publication deals with Education? Is there more than one publication? See how easy that was. :)
Last edited by livesoft on Fri Feb 01, 2013 4:36 pm, edited 1 time in total.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: [learning about] Taxes and deductions

Postby retiredjg » Fri Feb 01, 2013 4:35 pm

I don't know how they do military moves, but for regular fed employees, the cost of the move goes into your income and you take it off as a deduction. If that is true for you, an amended return is in order.

I doubt you or your CPA would have overlooked an extra $20k or $100k (or whatever) in your W2 though.
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Re: [learning about] Taxes and deductions

Postby LadyGeek » Fri Feb 01, 2013 4:47 pm

Greg17 wrote:I was- I got out two years ago.

Thanks, it never hurts to ask (and thanks for your service). I realize you're asking about taxes, but have you considered giving your investments and personal finance situation a check-up?

Take a look at the situations in the Investing - Help with Personal Investments and consider starting a new thread in the Asking Portfolio Questions format.

Also, it never hurts to go over the basics: Getting Started

The wiki won't answer your questions about how to do taxes, but there's a wealth of information available. I agree with the other posts that the IRS publications provide good guidance.
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Re: [learning about] Taxes and deductions

Postby Greg17 » Fri Feb 01, 2013 4:49 pm

Just to clarify I was using those two as an example only. I'm sure most years the standard deduction was my best option.

My goal of this thread is to be pointed in the right direction so I know for the tax year starting Jan 1, 2013. My research shows me that with a mortgage, now it would make more sense to itemize, and I want to keep good records to make filing next year easier.

A lot of good resources and I will start my reading. Thanks for the help.
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Re: [learning about] Taxes and deductions

Postby Greg17 » Fri Feb 01, 2013 6:10 pm

LadyGeek wrote:
Greg17 wrote:I was- I got out two years ago.

Thanks, it never hurts to ask (and thanks for your service). I realize you're asking about taxes, but have you considered giving your investments and personal finance situation a check-up?

Take a look at the situations in the Investing - Help with Personal Investments and consider starting a new thread in the Asking Portfolio Questions format.

Also, it never hurts to go over the basics: Getting Started

The wiki won't answer your questions about how to do taxes, but there's a wealth of information available. I agree with the other posts that the IRS publications provide good guidance.


There is definately a lot of good information. I am reviewing the investment info before I ask any questions that have been answered already.
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Re: [learning about] Taxes and deductions

Postby Gill » Fri Feb 01, 2013 6:15 pm

Greg17 wrote:My research shows me that with a mortgage, now it would make more sense to itemize...

It really isn't a matter of it "making more sense". You simply add up your allowed itemized deductions each year and if they exceed the standard deduction you itemize. If they don't, you use the standard deduction.
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Re: [learning about] Taxes and deductions

Postby jebmke » Fri Feb 01, 2013 6:22 pm

MBMiner wrote:
Greg17 wrote:My research shows me that with a mortgage, now it would make more sense to itemize...

It really isn't a matter of it "making more sense". You simply add up your allowed itemized deductions each year and if they exceed the standard deduction you itemize. If they don't, you use the standard deduction.
Bruce

Actually, not always true. In Maryland, if you itemize on FED you must itemize on State and vice versa. However, the standard deduction on the MD return is so crappy, there are times when it pays to force itemization on the Federal return (even if the Standard Ded is higher). Despite the higher Federal tax there are conditions when this generates a much lower state tax and your total tax liability is lower.
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Re: [learning about] Taxes and deductions

Postby Gill » Fri Feb 01, 2013 6:26 pm

jebmke wrote:However, the standard deduction on the MD return is so crappy, there are times when it pays to force itemization on the Federal return (even if the Standard Ded is higher). Despite the higher Federal tax there are conditions when this generates a much lower state tax and your total tax liability is lower.

Living in Florida for 36 years I tend to forget about state income taxes. However, is it possible to itemize on your 1040 if the total is lower than the standard deduction? I believe the form forces you to use the SD in that case.
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Re: [learning about] Taxes and deductions

Postby jebmke » Fri Feb 01, 2013 6:38 pm

MBMiner wrote:
jebmke wrote:However, the standard deduction on the MD return is so crappy, there are times when it pays to force itemization on the Federal return (even if the Standard Ded is higher). Despite the higher Federal tax there are conditions when this generates a much lower state tax and your total tax liability is lower.

Living in Florida for 36 years I tend to forget about state income taxes. However, is it possible to itemize on your 1040 if the total is lower than the standard deduction? I believe the form forces you to use the SD in that case.
Bruce

In the software I use (Taxwise) there is a box on the 1040p2 that allows you to check if you want to itemize despite the standard being higher. If you look at the paper 1040, it only asks you to put the standard or itemized - paper returns don't force you to do anything.

I haven't looked at TT to see if there is the option to override the usual logic of taking the higher standard deduction.
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Re: [learning about] Taxes and deductions

Postby jared » Fri Feb 01, 2013 6:54 pm

MBMiner wrote:
jebmke wrote:However, the standard deduction on the MD return is so crappy, there are times when it pays to force itemization on the Federal return (even if the Standard Ded is higher). Despite the higher Federal tax there are conditions when this generates a much lower state tax and your total tax liability is lower.

Living in Florida for 36 years I tend to forget about state income taxes. However, is it possible to itemize on your 1040 if the total is lower than the standard deduction? I believe the form forces you to use the SD in that case.
Bruce

Yes, it is possible to itemize deductions even if the amount is less than the standard deduction. In fact, some taxpayers are forced to itemize deductions even if less than standard deduction (i.e. married taxpayers filing separate returns if other spouse itemizes).
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Re: [learning about] Taxes and deductions

Postby Gill » Fri Feb 01, 2013 11:28 pm

jared wrote:Yes, it is possible to itemize deductions even if the amount is less than the standard deduction. In fact, some taxpayers are forced to itemize deductions even if less than standard deduction (i.e. married taxpayers filing separate returns if other spouse itemizes).

You're right. Forgot about that.
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Re: [learning about] Taxes and deductions

Postby grabiner » Sat Feb 02, 2013 12:30 am

jebmke wrote:
MBMiner wrote:
Greg17 wrote:My research shows me that with a mortgage, now it would make more sense to itemize...

It really isn't a matter of it "making more sense". You simply add up your allowed itemized deductions each year and if they exceed the standard deduction you itemize. If they don't, you use the standard deduction.
Bruce

Actually, not always true. In Maryland, if you itemize on FED you must itemize on State and vice versa.


In Maryland, it's a one-way requirement; you can itemize federal deductions and take the state standard deduction, but if you take the federal standard deduction, you must take the standard deduction in Maryland.

Maryland 1040 instructions wrote:To use the ITEMIZED DEDUCTION METHOD, you must itemize your deductions on your federal return and complete federal Form 1040 Schedule A.
...
You are not required to itemize deductions on your Maryland return simply because you itemized on your federal return. Figure your tax each way to determine which method is best for you.


There are some states in which you must itemize on the state return if you itemized on the federal return; Virginia is one example.
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