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Old 02-24-2014, 08:05 PM   #16
Owensdad
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Originally Posted by InNoHurry View Post
Hypothetically, what's the rule of thumb to calculate the out of state purchases/taxes?

Thanks.
I assume you mean to *estimate* the use tax you owe? Unfortunately, there really isn't a rule of thumb in this regard that I am aware of as this is meant to be an actual amount of CA use tax.

Not a great answer but I don't have a better one.

Aside: all CA resident CPAs and EAs get a flyer from the BOE every year around this time reminding them to emphasize this issue to their clients. Perhaps a natural consequence of a relatively high use tax rate that encourages evasion.

PSA: this will be reviewed in every state audit of a personal return. Count on it.
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Originally Posted by afm199
[Owensdad], you usually pull the trigger on a mouth full of buzz words without thinking.

Last edited by Owensdad; 02-27-2014 at 10:24 PM..
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Old 02-24-2014, 08:08 PM   #17
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Originally Posted by B-Cuz View Post
Is it better to have a sit down with a Tax Rep for simple preparation? I've always enjoyed the ease of TurboTax.

Thanks in advance.
Probably not for a simple personal return.

That said, you will get the most mileage out of any capable paid preparer if you stick with that preparer over many years.

When your baller potential is realized in the future, a long term tax advisor will know where you came from, your priorities, goals, and will have in the forefront of their mind facts a new advisor will have to discover.
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Originally Posted by afm199
[Owensdad], you usually pull the trigger on a mouth full of buzz words without thinking.

Last edited by Owensdad; 02-25-2014 at 07:06 PM..
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Old 02-24-2014, 08:13 PM   #18
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Originally Posted by 1962siia88 View Post
Say hypothetically I was to get a gig as a motorcycle riding instructor and that income was reported on a 1099. Would I be able to report that income on a Schedule C and then deduct a reasonable portion of my gear, mileage, training/education, parts/repairs, and the cost of the motorcycle?

Thanks.

Daniel
Yes you will!

Be sure to keep in mind the rules around mixed use (personal and business) property; for example, a vehicle that you use personally and in your business. This is also known as "listed" property. All the off the shelf software I've ever used will guide you through these rules.

Use schedule C to report your income and deductions as a sole proprietor. You will probably need to make estimated payments if you are profitable and don't forget to budget for "self employment" tax (i.e., the employer portion of social security, medicare, and certain state payroll taxes).
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Originally Posted by afm199
[Owensdad], you usually pull the trigger on a mouth full of buzz words without thinking.

Last edited by Owensdad; 02-24-2014 at 08:21 PM..
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Old 02-24-2014, 08:15 PM   #19
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Originally Posted by Holeshot View Post
I've got one Sam: What actions/ deduction are most likely to bring an audit?!!!
Hard to say but common audit targets are the self employed, folks that work in cash oriented occupations, and high earners.
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Originally Posted by afm199
[Owensdad], you usually pull the trigger on a mouth full of buzz words without thinking.

Last edited by Owensdad; 02-24-2014 at 08:21 PM..
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Old 02-24-2014, 08:19 PM   #20
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Originally Posted by yellowrasta View Post
A buddy of mine tried to convince me why it's better to claim 1 dependent versus 0. I was drunk, and totally forgot what he said, so I don't remember. What's your thoughts on the matter?
I'm assuming you mean on your withholding allowance certificate, aka W-4. This will simply result in you over withholding on this particular income stream (e.g., wages). Many people do this to avoid under withholding or to generate a larger refund when you file your return, think of it as a forced savings mechanism.

Claiming 0 dependents when you are entitled to claim 1 on your *return* will simply result in you recognizing a larger tax liability than you are required to under the law. No bueno.
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Originally Posted by afm199
[Owensdad], you usually pull the trigger on a mouth full of buzz words without thinking.

Last edited by Owensdad; 02-24-2014 at 09:48 PM..
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Old 02-24-2014, 08:32 PM   #21
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Originally Posted by Owensdad View Post
Yes you will!

Be sure to keep in mind the rules around mixed use (personal and business) property; for example, a vehicle that you use personally and in your business. This is also known as "listed" property. All the off the shelf software I've ever used will guide you through these rules.

Use schedule C to report your income and deductions as a sole proprietor. You will probably need to make estimated payments if you are profitable and don't forget to budget for "self employment" tax (i.e., the employer portion of social security, medicare, and certain state payroll taxes).

That what I thought! Thanks. How long can I run that schedule c at a loss before I start setting off irs red flags? Thanks again!

Daniel
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Old 02-24-2014, 09:46 PM   #22
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Originally Posted by 1962siia88 View Post
That what I thought! Thanks. How long can I run that schedule c at a loss before I start setting off irs red flags? Thanks again!

Daniel
Good follow up question and my original response was incomplete...

To deduct losses from your instructor business against other earned income you generally need to be profitable 3 out of 5 years (2 out of 7 for race horse breeding, thank the equine lobby for that gem).

The policy reason is that "hobby" losses should not offset other income.
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[Owensdad], you usually pull the trigger on a mouth full of buzz words without thinking.

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Old 02-24-2014, 10:17 PM   #23
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In Hobby Loss, is that any 3/ 5 year period?
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Old 02-25-2014, 09:00 AM   #24
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I've been using TurboTax, and think I've found a flaw:

I am a 33% owner of a property that I rent out, but receive 100% of the rental income. TurboTax asks "What is your income from the rental property?" then asks "What percentage owner are you in this property?"

When I enter $x for my rental income, and then enter 33% for the percentage, TT seems to calculate that I owe taxes on 1/3 of my total rental income. It's as if they didn't take into account that a person could receive 100% of the income while only owning 33% of the property. It's as if there should be a third question, "What percentage of this income did you receive?"

This works out great for me, since according to TT I get 2/3 of the rental income tax free, but I'm one of those weirdos that doesn't cheat on my taxes....that being said I take every opportunity to legally avoid them.

So the question is: Is TT making a mistake, or is this a lucky loophole for me? I assume the former.

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Old 02-25-2014, 02:02 PM   #25
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Originally Posted by Poxy View Post
I've been using TurboTax, and think I've found a flaw:

I am a 33% owner of a property that I rent out, but receive 100% of the rental income. TurboTax asks "What is your income from the rental property?" then asks "What percentage owner are you in this property?"

When I enter $x for my rental income, and then enter 33% for the percentage, TT seems to calculate that I owe taxes on 1/3 of my total rental income. It's as if they didn't take into account that a person could receive 100% of the income while only owning 33% of the property. It's as if there should be a third question, "What percentage of this income did you receive?"

This works out great for me, since according to TT I get 2/3 of the rental income tax free, but I'm one of those weirdos that doesn't cheat on my taxes....that being said I take every opportunity to legally avoid them.

So the question is: Is TT making a mistake, or is this a lucky loophole for me? I assume the former.
Going to need more details.

The key question is how is it that your 33% ownership in the property entitles you to a 100% interest in the income it generates?

What do the other owner[s] own, the underlying property? Do you own this interest through a partnership where you receive a special allocation? If so, do your partnership allocations have "substantial economic effect"? Do you get a K-1 for this interest?

In a partnership context, items of income, expense, deduction and credit, etc., can be specially allocated to a specific partner, but these special allocations must have economic effect (meaning the partner to whom they are allocated must also bear the actual economic benefits and burdens, such as increased tax liability) or they will be disregarded.

In general, if you are entitled to 100% of the income stream, your *taxable* share of the income is almost certainly 100%.
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[Owensdad], you usually pull the trigger on a mouth full of buzz words without thinking.

Last edited by Owensdad; 02-25-2014 at 02:25 PM..
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Old 02-25-2014, 02:22 PM   #26
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Originally Posted by Holeshot View Post
In Hobby Loss, is that any 3/ 5 year period?
This is the safe harbor rule. An activity is assumed to be "for profit" if it realized a profit in 3 out of the last 5 years.

For new businesses that do not have sufficient experience to meet the safe harbor test, you can elect to have this test applied after 5 years, or you can assert that the activity is factually for profit, a qualitative test that is subject to IRS challenge.

Making the election will automatically extend the statute of limitations on each year in the 5 year period until 2 years after the due date of the return for the last year in the 5 year period.
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[Owensdad], you usually pull the trigger on a mouth full of buzz words without thinking.

Last edited by Owensdad; 02-25-2014 at 07:01 PM..
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Old 02-25-2014, 03:55 PM   #27
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In general, if you are entitled to 100% of the income stream, your *taxable* share of the income is almost certainly 100%.
That's what I thought.

Thanks!
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Old 02-25-2014, 05:24 PM   #28
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That's what I thought.

Thanks!
It's a cold comfort, but this seemes intuitively correct, agree?

That said, there may be planning opportunities in your fact pattern.
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[Owensdad], you usually pull the trigger on a mouth full of buzz words without thinking.

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Old 02-25-2014, 07:16 PM   #29
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It's a cold comfort, but this seemes intuitively correct, agree?

That said, there may be planning opportunities in your fact pattern.
Yes, I knew there was something wrong with that. I do in fact have a strategy, but it's a long boring story.

Thanks for confirming!
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Old 02-25-2014, 07:24 PM   #30
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Thanks Sam!
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