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Posted by Rich Carreiro on February 26, 2007, 12:34 am
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KonstantinSolomon@moscowmail.com writes:
> I am a single guy, no kids, do dependents.
>
> The H & R girl used form 1040 and wrote following in the
> form:
>
> My business income and total income is $12,114.
>
> She deducted $865 one half or self employment tax.
> Is that right?
$12114 x 0.9235 x 0.153 = $1712 SE tax.
Half that is $856. So either either she
made a $10 mistake or you typoed the amount.
> She reported that as my adjusted gross income $ 11,258.
$12114 - $856 = $11258, so that's correct.
> She wrote as standard deduction $ 5,150.
Assuming you're under 65, that's correct.
> She subtracted line 40 from line 38, and wrote $ 6.108 in
> that line.
That's correct.
> Under line 42 it says: Otherwise, multiply $ 3,300 by the
> total number of exemptions claimed on line 6d. She wrote $
> 3,300 in line 42, and I have no clue why.
Because you get one exemption for yourself. Again,
she's correct.
> Under line 44, she wrote that 2,808 is my taxable income.
> Why?
Because $6108 - $3300 = $2808. Adjusted gross income
minus deductions minus personal exemptions is taxable
income. She's still correct.
> I checked the tax table and taxable income of $ 11,258
> for a single guy is $ 1,306 not $ 2,808.
Your taxable income is NOT $11258. Your taxable income
is $2808.
> Under line 46, it says: Tax. Check if tax is from a [ ]
> form(s) 8814 b [ ] form 4972. She did check any of these
> boxes but wrote $281 which she added to my taxes. What is
> that for?
That's the income tax on $2808 of taxable income.
> On line 58, she wrote that my self employment tax would be
> $ 1,712.
That's correct.
> She added the $ 281 and wrote in the form that I owe $ 1,993
> taxes.
That's correct.
> In line 72, she wrote 0.
Since you apparently made no estimated tax payments, that's
correct.
> In line 76, it says, that line 72 should be subtracted from
> line 63, and wrote as amount that I owe $2,087.
Because form 1040 is designed badly and it's not obvious that
line 76 includes the penalty computed on Form 2210 and reported
on line 77. She computed you owed a $94 penalty and
$94 + $1993 = $2087. So assuming she computed the penalty
correctly, line 76 is also correct.
> -----------------------------------
> Then the H & R girl filled in form 2210.
> She wrote under
> 1. Enter your 2006 tax after credits from form 1040,
> line 59. She wrote $ 281.
> (I have no clue what this is)
As previously stated, it's your income tax.
> 2. Self employment taxes, she wrote in $ 1,712.
Which it is.
> ---------------
> She gave me a form 1040, Scedule 10
There's no such thing as a "Schedule 10". Presumably
you mean "Schedule C".
> She wrote in as income $16,794. This number is correct as
> that is the amount of money that my customers paid me and my
> only income. I had start up expenses of approx. 900 Dollars
> in Dec. 2005. I bought a computer for 1119 $ this year for
> my business. She just deducted that computer with $ 40. She
> wrote that it is a 7 years property.
I believe computers are actually 5-year property, according
to the IRS depreciation rules. Also, you very likely could
have elected to write off the whole $1119 this year by making
what's called a "Section 179 election".
> And she calculated my total expenses, all business expenses
> just with $ 261? How is that possible?
Well, what business expenses did you have? Unless you
tell us, we can't evaluate whether she did it correctly
or not.
> She deducted $ 4,419 expenses for business of use of my
> home. (I use the large room as business office, as I just
> have a one bedroom apartment and can't work in my tiny
Assuming you use that large room *exclusively* (and that
term is taken literally by the IRS) you can indeed
deduct a fraction of your rent as a business expense. One
way to get that fraction is what percentage of total
apartment square footage the business space is. If the
large room is a large fraction of the size of the apartment,
the $4419 may be correct. However, if you do not literally
use the room exclusively for business, you can't take this
business deduction.
> Otherwise, somebody in my family died and I brought her
> (good) stuff to a non profit organization like Salvation
> Army. They gave me signed receipts and they amount to
> approx. $1000. That H & R girls said that I can't deduct
> anything as a private person because I deducted already so
> much as a business.
>
> Really? Is that true? I can't believe it.
That's incorrect (assuming you understood what she said).
However, it very likely doesn't matter, since you either
take the standard deduction or your itemize. Unless your
itemized deductions (which do NOT include business expenses)
is more than your $5150 standard deduction, there's no point
in itemizing. Which does mean you get no tax benefit from
the donation.
--
Rich Carreiro rlcarr@animato.arlington.ma.us
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