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Posted by Wendy Wilson (+6175) 11 years ago
I know I'll regret this but if you have any general tax questions post them here. I'll do my best to answer them.
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Posted by Josh Rath (+2303) 11 years ago
Alright I have one for you.

Since I am new to having to do taxes... Why is it that I may have to pay MORE money to the federal taxes if they have come from my paycheck automatically all year?
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Posted by Hal Neumann (+10176) 11 years ago
Josh, you have the tax & spend Conservos on Capitol Hill to thank for that.


Wendy, `Hope this will help to get your thread off to a proper start.
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Posted by MilesCity.com Webmaster (+10017) 11 years ago
Wendy is the expert, however ...

(A) Up what is pulled out, but not too much, so you don't have to deal with it later

(B) I assume you are making more than $7K per year (is that the current number?) otherwise you don't have to pay anything

(C) I am perhaps completly 100% wrong on this, however the "MilesCam" may be a deduction -- or not -- Wendy needs to chime in

(D) In regards to (C), if you qualify for having a business, then you get super awesome deductions -- as in possibly making money and not paying any taxes

(E) Not mentioned, but move to a state that has no income tax (e.g. Washington is one)
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Posted by Josh Rath (+2303) 11 years ago
Last year I made $8600. And as for the MilesCam, this was the final year my parents are assisting with my taxes. They filed them separately for me, which who knows. May have been a mistake. I will be finding out this morning when i go visit my tax lady... and depending on if I get a refund or not, possibly my former tax lady.
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Posted by MilesCity.com Webmaster (+10017) 11 years ago
My mother did the exact same thing to me, however in my case it prevented receiving financial assistance from EMC. Luckily she doesn't read this site, otherwise I'd really get it, even though I'm a 40-something year old man now.
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Posted by Wendy Wilson (+6175) 11 years ago
Josh Rath wrote:
and depending on if I get a refund or not, possibly my former tax lady.

Josh, don't shoot the messenger. Your tax preparer isn't responsible for the tax laws.

If you've been showing a profit on the webcam business you'll likely have some self-employment tax on it in addition to any income tax. When you get paid as an employee your boss withholds federal tax, social security tax, and medicare tax. They actually only withhold 1/2 of the SS tax and med tax you owe, the other half they are responsible to pay. When you are self-employed YOU have to pay the whole shebang. Federal income tax, social security tax and medicare tax. That may be where you are right now. Also, you are in charge of how much federal tax is withheld from your paycheck. Your tax lady has nothing to do with that. If you didn't have enough withheld to cover the webcam income it's your own fault.
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Posted by Josh Rath (+2303) 11 years ago
The webcam is not on my taxes. Mainly because I haven't ever seen a profit, and never will. But, none the less, i got a large refund so I am happy.
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Posted by Levi Forman (+3710) 11 years ago
You shouldn't be happy about getting a large refund. All that means is that your paychecks are smaller than they should be and you are providing a zero-interest loan to the government every month.
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Posted by Wendy Wilson (+6175) 11 years ago
Josh, it sounds like the webcam is a hobby rather than a business. And Levi's absolutely right. A refund is just your own money. Some folks like to use their withholdings like a forced savings account. If that's the only way you can save then go for it. Otherwise put your money in a savings account and earn some (well, a little) interest. I'm glad your tax lady didn't have to face the rath of Rath!
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Posted by Josh Rath (+2303) 11 years ago
The webcam is a hobby, because turning it into a business would be more than I'd like to take on.
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Posted by Buck Showalter (+4458) 11 years ago
I think maybe this is the question. Wendy, when filling out a W-4, is it generally wise to under claim dependents to avoid having to pay in at the end?

When I look at a W-4, the first two lines say "Enter 1 for yourself if no one else can claim you" and "Enter 1 if you are single and have only one job" - For a single person with only one job, is it wise to ignore that second line and try to keep your total deductions at 1 and is it possible to set it 0 to have your employer deduct the maximum each paycheck?

For Josh and I, paying in at the end should only result from claiming too many dependents - I think?
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Posted by Barb Holcomb (+404) 11 years ago
Wendy

If you sell a house and make a profit, what is the amount of time you have to reinvest that into another house before having to pay capital gains tax and is there/was there a military clause to this? I thought I heard something about this last year while deployed but news was very sketchy. Thanks.
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Posted by Wendy Wilson (+6175) 11 years ago
First to Buck: I always recommend to my single clients to chose Single and 0 or 1 exemptions (dependents). You'll most likely get a refund of some sort. If you go 2 then you may have to pay something. If you have more than one job at the same time you definitely want to go with 0 on at least one of them.

To Barb,

You are thinking of a very old rule that hasn't existed for many years. These days, if your total gain on the sale was below 250,000 (single) or 500,000 (married filing jointly) and you lived in the house at least 2 of the 5 years prior to selling it, you pay no tax. If you didn't live there for 2 years or your gain was greater than I mentioned you may still be able to avoid tax on most of the gain. There's no requirement to rebuy anymore. If you are away because of active duty you may be able to work around the time period.
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Posted by Montana Kid (+111) 11 years ago
My son lives in another state, working full time...is not a Montana resident anymore. He does, however, have a simple passbook savings account here. Does he have to file in Montana for whatever interest that whopping rate generated?
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Posted by Wendy Wilson (+6175) 11 years ago
No, interest earned is attributed to the state where he is a resident regardless of where his bank account is.
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Posted by Levi Forman (+3710) 11 years ago
I have always claimed 2 exemptions and I always come in within $100 on one side or the other. Most years I had to pay a small amount (~$70) to federal and got roughly the same amount as a refund from state so it worked out about as well as could be expected.
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Posted by Wendy Wilson (+6175) 11 years ago
Levi, you're doing what I feel is best for most folks. Why give the feds a loan of your hard-earned money? But I also realize that many folks use it like a savings account and if they want to do that I'll tell them the consequences.
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Posted by Barb Holcomb (+404) 11 years ago
Wendy - thanks. Appreciate the help, it's hard to keep up with the changes. We haven't sold yet but are trying to figure out whether to buy or rent at the next place since we'll only be there 2 years. Cheers!
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