1B - In the answer to my follow-up question #6 concerning itemized deductions, you wrote "(the form will tell you...if something needs to be adjusted)." Is "form" indicating Schedule A, the instructions for Schedule A, or something else?
In the case of the sales vs income taxes, note that the schedule A says the following:
State and local (check only one box):
Income taxes, Box A or
General sales taxes, Box B
The best answer to your question here is that usually the form will indicate (as here) OR will refer you to another form or the instructions,
2B - Thank you for the URLs for information about itemized deductions. My question is: Will any of the three be helpful only for 2013, or will any or all of them help me with my current chore of filing a tax return for 2012?
Deductions dont really change that much. SOME laws change, (rates and brackets change pretty much every year) and even some of the no more than and no less thans change (such as with the medical deductions I referenced before) BUT mist of the deductions themselves dont change because those are there for policy reasons .. e.g., property taxes and the State and local income OR sales are there because it always been believed that you shouldn't be taxed twice on the same dollar ... the mortgage interest deduction and the exclusion of gain on personal residence sales have been there for ages because the government is trying to inventivize home ownership.
I have not scanned the list, but Id be surprised if anything much (other thn maybe some of the limits) have changed at all.
Now I would like to make three statements that I think are accurate. For each one, feel free to respond with a "Yes" if my understanding is indeed accurate:
3B - I need to attach Form 982 to Form 1040, but I do not need to transfer any numbers from Form 982 to a line or box on Form 1040.
4B - When the IRS (and thanks for letting me know I am not the only person who means IRS while typing IRA) says that forgiven debt can be excluded from a person's gross income, they only mean that the forgiven debt does not need to be added to income; they do NOT mean that any of the forgiven debt can be deducted from income--is this correct? The answer seems so obvious that you might wonder how I can ask the question with a straight face, but I thought "It cannot hurt to ask." Where tax return wisdom is concerned, more is more.
Thats actually very perceptive on your part; Excluded means NOT INCLUDED as INCOME At ALL ... where deducted means its reported and then deducted somewhere on the forms such as schedule A for mortgage interst or the front of the 1040 for the self employed health insurance deduction
5B - The term "basis of nondepreciable assets" means how much I paid for my shoes, bed sheets, and so forth, whereas the term "fair market value" means how much each item would be worth if I sold it. An excellent example, I think, is my two pairs of eyeglasses with prescription lenses, purchased in 2004. Their aggregate basis is $800, but the lenses (the most expensive component) would not have any market value at all. Only one pair of frames is in mint condition. Ebay might help me calculate a FMV for the frames, but I would bet that Ebay evidence would suggest a FMV of less than $50.
Exactly, you have it.
Finally, I have new questions about the beloved Form 982, all of them about instruction #2 in the "any other debt" section. (Did I once say that Instructions #1 and #2 were straightforward? I am now saying, in regard to instruction #2 "Think again!").
6B - At the beginning of the second sentence of Instruction #2, does the qualifier "If you were insolvent" mean "If you are attaching Form 982 because of insolvency without bankruptcy" (in which case I can ignore it, since I am reporting a Chapter 7 bankruptcy), or does it apply to me?
Thats right you are asking for the bankruptcy exclusion
7B - If your answer to the preceding question is "Ignore the second sentence," then it is okay to ignore this question. If "insolvent" applies to me, however, then do I answer on the basis of my financial situation just after the discharge of debt or just before? The bankruptcy proceeding that concluded on January 21st did not remove a student loan debt (later forgiven in an adversarial proceeding as part of the same case). With some careful sleuthing, I can figure out if the student loan balance slightly exceeded my savings on January 21st, if it matters. Otherwise, I was not insolvent in the time just after January 21st.
I think the answer to that question is here in the instructions: Check the box on line 1a if the discharge was made in a title 11 case (see Definitions on page 3) or the box on line 1b if the discharge occurred when you were insolvent (see Line 1b on page 3).
Remember, the bankruptcy exclusion and the insolvency exclusion are two different exclusions ... to provide context, Mortgage debt, insolvency and Bankrupty are the three exclusions under the act.
8B - Hopping back to the first sentence of Instruction #2, is "the amount of discharged nonbusiness debt" the same as the aggregate debt that the bankruptcy court discharged?
9B - This question is related to the preceding question. The student loan is the only debt for which I have an exact dollars-and-cents figure for the size of the debt when it was discharged. For the first part of the bankruptcy proceeding, I know that as the trustee talked to my attorney and me, the trustee was able to look at a list of my creditors (my mortgage lender, a condominium association, and two utility companies--electricity and gas) along with the amounts owed that I had reported to my attorney. When I compiled the report in September, the dollar-and-cents amounts were reasonably accurate. In regard to the discharge of debt on January 21st, however, true accuracy is elusive. Late fees and interest are not completely knowable for all four creditors, especially if I need to pin them down to a specific date in January. If I estimate the amounts very carefully, will an estimate be good enough?
Remember that you only need to show that you were insolvent. Any debt above that is irrelevant .. Err on the conservative side and report only what you know to be true .. any fees or othr accruals will only add to your case.