Thanks for trusting a fellow expert with your tax questions.
The income that you make here on JA is considered to be income from self employment. You will have to report your income from JA and any related expenses you have by filing Schedule C and Schedule SE with your personal tax return.
On Schedule C you will report all of the earnings you had from JA for the year. You may claim a deduction for the percentage of your internet fees as it relates to your business usage versus your personal usage. In other words, if you use the internet 50% for business and 50% for personal use not related to your business, then you can deduct 50% of your internet fees. As far as the computer which you purchased, this is considered an asset, and you may depreciate the cost of that asset over a period of 5 years. Again, this is limited to the percentage of use that is attributed to business. As an example -- if the cost of your computer was $1,000 and you use it 50% for business an 50% for personal use, then you may depreciate 50% of the total cost over a period of 5 years. So you would claim a depreciation expense of $100 each year for the next 5 years, at the end of which time you could claim no more depreciation expense.
Once you have computed your net income on Schedule C after deducting these types of expenses, that amount will then transfer over to line #12 of your main tax Form 1040, and will be added to any other taxable income you and your wife have for the year.
Your net income will also need to be entered on Schedule SE. As a self employed person, your net earnings from self employment are not ony subject to income taxes, but also to SS and Medicare taxes. Those two taxes are computed separately on Schedule SE and will be paid with your regular income taxes when you file your return.
Thank you Pete and let me know if you have more questions.
Hello again Pete,
Actually, any tax software program would easily handle Schedule C and Schedule SE forms. I personally prefer to use TaxAct, as I have had some issues in previous years with Turbo Tax not always being up to date on the latest state law changes.
Also with TaxAct you can file your federal return for absolutely no charge, and they only charge $14.95 to file your state return, so it is really a reasonable price, and you do not need to buy the software. You can simply sign on to their website at www.taxact.com, register as a user, and fill out your forms right on line. And the only fee you will pay is the $14.95 to e-file your state return.
Thanks Pete and let me know if you have more questions.
Thanks Pete, and let me know if you need more help.
What you paid was fine, and I appreciate the bonus. Have a happy new year.
A 1099-G form is a form that your state sends you to report any state refund that you received. In other words, if you received a refund in 2009 for your 2008 state tax return, then the refund received in 2009 is taxable income to -- but ONLY if you itemized your deductions in the year 2008. If you claimed the standard deduction in 2008 on your federal return, then you do not need to report the amount on the 1099-G form as income on your tax return this year.
A 1099-INT is a form used to report interest that you were paid. It is possible that if the state was late in mailing you your refund, they may have added a small amount of interest to the refund you were due. If that is what happened, then the interest does need to be included on your 2009 tax return. You would include this interest on line 8a of your federal Form 1040. If you had more than $1,500 total in interest for the year from all investments, you first need to fill out Schedule B -- otherwise just list the interest you earned on line 8a of your Form 1040.
Okay, you had no interest to report if box 2 was blank.
All they are reporting to you on that form is the state refund that you received for your 2008 taxes. If you go back and look at a copy of your 2008 state tax return, you should see on there where you were to receive a refund of $421.00. That refund would not have been actually paid to you until sometime in 2009. So now that it's 2009, the state has to report that they sent you that refund of $421.00 as it may be taxable income to you in 2009 -- but ONLY if you itemized your federal deductions in 2008.
On your 2008 federal tax return, if you claimed the standard deduction instead of itemizing your deductions, then you will not need to report this amount anywhere. Just keep the form with your tax files and you will not need to do anything with it at all. But in 2008 if you itemized your deductions on your federal return, that means one of the deductions you claimed would have been the state taxes deducted from your paychecks. If you then got a partial refund of those taxes, it now becomes taxable income to you in the year the refund was received. Hopefully all of that made sense.
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Look at your federal return for 2008 to see if you itemized your deductions on Schedule A or if you just claimed the standard deduction. If you claimed the standard deduction then you do nothing at all with this 1099-G form. Do not report it anywhere. If you itemized your deductions then you must claim this $421 refund as income in 2009 by showing i on line 10 of your form 1040.
The only way to get a copy of what you filed last year is through the IRS. To get an actual copy of your whole tax return, it costs $57 and takes about 60 days to get.
What I would suggest is instead order a tax transcript from the IRS. A tax transcript would not be an actual copy of your return, but it would be a computerized printout that shows you line by line what you reported on last year's return. Tax transcripts are free and take about 10 days to receive. Sometimes they can even fax these to you within 24 hours.
Once you receive that transcript you will be able to tell whether or not you itemized last year and whether or not you need to report this as income.
You can order a tax transcript for the 2008 tax year by calling the IRS at(NNN) NNN-NNNN Be prepared for a possible lengthy wait to speak to someone with it being tax season.
The only other thing I can suggest is really think about whether or not you would have itemized last year. The standard deduction last year for a married couple was $10,900. So you would have had to have deductions more than that amount to itemize. Normally people who itemize do so every year, and you would have to have some pretty large deductions for things like mortgage interest, property taxes, state taxes and things of that nature.
If you are not sure then I would suggest ordering the tax transcript. It may delay you filing your return for a couple of weeks waiting for the transcript, but if you simply add the $421 as income to your return, you are going to end up paying tax on that amount and may not need to. Depending on your tax bracket that could cost you anywhere from $42 up to $120 extra in tax.
Thank you pete
Hello again pete,
Real estate taxes are sometimes referred to as property taxes. I think maybe what you are thinking of is personal property taxes, and those of course are different than real estate taxes. But yes, on the line where TaxAct ask for real estate taxes (property taxes), that is where you enter the taxes you pay on your mobile home.
Further in the questionnaire they should also ask if you paid personal property taxes or other taxes. Personal property taxes would be taxes you were assessed on a car you own or a boat and trailer. Not all counties impose such a tax, so depending on where you live, you may or may not have personal property tax expenses.
As far as the interest paid on your home, it's not going to hurt you to enter that amount. TaxAct will ask you for any expenses you had at all pertaining to things like medical expenses, real estate taxes, personal property taxes, mortgage interest, charitable contributions and things of that nature. Once you answer the entire questionnaire on expenses, it will automatically calculate if you are better off to use the standard deduction or to itemize, and you should get a message saying something like --"Turbo Tax has determined that you will be better off to use the standard deduction". And then you need to confirm that you are in agreement with doing that.
Some people still itemize even though they end up with a lower amount than the standard deduction allows, and the reason for that is that depending on what state you live in, you come out better to itemize on your state taxes. But if you live in MT, this would not be a factor in your state. So if your standard deduction comes out to be the highest, that is what you will want to use.
Hope this helps.
Just because you received a 1099G form, that is no indication at all that you itemized. You receive that every year that you receive a state refund automatically. You could have just as easily used the standard deduction last year, and if you had a state refund you would still get the 1099G form.
My guess is that if you do not have enough deductions to itemize this year, and if your deductions have not changed a lot from last year, than last year you probably used the standard deduction as well. If that turns out to be the case, you will not have to include the amount reported on the 1099G as income for this year.
As far as JA income, yes it would be nice not to pay taxes on that, but there's no way to legally avoid it. But it is nice to have the extra income.