Live chat transcript: CPAs answer personal and small-business tax questions

A panel of certified public accountants from the New York State Society of CPAs answered Newsday readers' questions about personal and small-business taxes in two separate live chats for the 2013 tax season.

The certified public accountants assisting in the Tax Help live webchat hosted by Newsday can answer general questions, but the answers are not a substitute for individualized advice and guidance from a professional Tax Advisor who is hired by you and has full knowledge of your specific circumstances or needs. Newsday makes no representations or warranties of any kind as to information given by the Tax Help accountants, and under no circumstances will it or the accountants be liable to any participant or other person for damages of any nature arising in any way from the use of such information.

Monday, Feb. 25, 2013

LIVE CHAT TRANSCRIPT:

9:49
Moderator: Welcome to our live chat on personal income taxes. Our panel of CPAs will start answering questions at 11:00 a.m. You can send in your questions now.

11:00
Moderator: We're just about to get started. We have three CPAs here to answer questions. They are ...

11:00
Elizabeth A. Vuozzo CPA: Hello my name is Elizabeth Vuozzo and I am a Director at The Fuoco Group LLP. with several locations in New York and Florida

11:00
Bob Schaffer CPA: HI. My name is Bob Schaffer. I am with Castellano Korenberg & Co CPAs in Hicksville NY.

11:01
Don Crotty, CPA: Hi, my name is Don Crotty, CPA. I am Senior Manager at Marcum LLP in our Melville, NY office. I have over 18 years experience and look forward to helping everyone!

11:05
Comment From Rosa P.
I filled my taxes with my husband early in January of this year but didn't get my education credit for going to college because of a glitch in the system. Now that it has been fixed is their a way to claim that credit or can I carry it over to next year?

11:05
Elizabeth A. Vuozzo CPA: Hi Rosa you will have to file an amended tax return, form 1040X in order to claim the education credit you missed. Carrying if forward is not an option.

11:05
Comment From LImom
My husband and I benefitted by filing separately until our children entered college and then we filed jointly. Now that both are through school, how do we evaluate whether it makes sense to file separately again. PS we still have some of their school debt.

11:06
Moderator: We have another CPA joining us now, he is ...

11:06
JACK ANGEL: Hi I am Jack Angel, CPA of Adelphi University.

11:07
Comment From bob
Is MIP deductible for 2012? I thought it wasn't but just read an article saying it was extending with fiscal cliff negotiations

11:07
Don Crotty, CPA: Hi Bob. Yes, the Mortgage Insurance Premium (MIP) deduction was extended through 2013. So you may be able deduct this on your 2012 and 2013 return. Keep in mind that the deduction phases out once your adjusted gross income starts to exceed $100,000.

11:08
Comment From Paul
Hi, I turned 70½ last June. I chose to withdraw as first time IRA minimum distribution for year 2012, delayed until February 2013. I am assuming that since it was withdrawn in 2013, instead of year 2012, that I do not have to report it on year 2012 tax form. Furthermore, I must now report on tax form year 2013, both the delayed min.distribution for year 2012 + min distribution year 2013. Is this correct ? Thank you

11:09
Elizabeth A. Vuozzo CPA: Hi Paul you are correct, as a cash basis taxpayer you will report the delayed 2012 distribution and the 2013 distribution in 2013, when they were both received.

11:09
Comment From toni
explanation of figure in box 12A of W-2 coded DD. Health insurance premium cost, both employer and employee portion. why isn't it broken down into two figures. If I can't find my final paystub, how can I determine my deductible cost.thanks

11:09
Bob Schaffer CPA: The amount in Box 12A coded DD is the cost of employer-sponsored health coverage. It is not taxable and should be ignored. If you paid any after tax health insurance premiums, they would be deductible on Schedule A if you are itemizing your deductions and have enough medical expenses to be able to claim them. If you don't have the amount, it should be on any of your paystubs showing year to date payments. You can also multiply the amount per paycheck by the number of paychecks you received during the year if you don't have the final paystub for the year.

11:11
JACK ANGEL: Hi LLMom,
You can answer this question by computing your tax bill both jointly & married filing separately. Some factors that will influence your ax bill is the existence of medical expenses and miscellaneous itemized deductions such as employee business expenses. Both are deductible after exceeding a % of your income.

11:13
Comment From Marty
My son was 13 years old last year and earned $1300 from refereeing. Form 1099 misc. Does he have to file a return since he is a minor?

11:13
Don Crotty, CPA: Hi Marty. Your son does not have to file his own tax return. The filing requirement is based on the type and amount of income, not his age. Since the 1099-MISC income was less than the standard deduction, he does not have to file. However, if there was any federal or state withholding, then it may make sense to file a return just to get withholdings refunded. If

11:16
Moderator: The certified public accountants assisting in the Tax Help live webchat hosted by Newsday can answer general questions, but the answers are not a substitute for individualized advice and guidance from a professional Tax Advisor who is hired by you and has full knowledge of your specific circumstances or needs. Newsday makes no representations or warranties of any kind as to information given by the Tax Help accountants, and under no circumstances will it or the accountants be liable to any participant or other person for damages of any nature arising in any way from the use of such information.

11:17
Comment From PATRICK
My father-in-law is retired and collecting a pension as well as Social Security. His wife, who is still working, wants to claim him as a dependent on her return. Is this acceptable? Thank you.

11:17
Elizabeth A. Vuozzo CPA: Hi Patrick your father in law and his wife can file a joint return, or married filing separately but either way they decide to file she cannot claim him as a dependent.

11:20
Comment From Linda S
At what age do you have to be to stop paying taxes? How much do you have to claim on SSI when you work in that same year? Thanks

11:20
Don Crotty, CPA: Hi Linda S. Unfortunately, there is no age where we get to stop paying taxes. It depends on how much income and the type of income that you have that determines if you still have to pay taxes. If you income exceeds the standard deduction, then you generally have to file a tax return. If you received Social Security income (SSI), you have to report the entire amount on your tax return. It depends on how much other income you have that will determine how much of your SSI is taxable on your return. If all you have is SSI, then generally you have no tax liability.

11:21
Comment From Holly
Our taxes for the 2010 tax year required us to pay an Alternative Minimum Tax. A CPA filed our returns in our behalf which included Form 6251. For our 2011 taxes we used TurboTax and we were not entitled to any Alternative Minimum Tax Credit for the tax paid in the prior year. This year we are again using TurboTax and it is asking for information from Form 6251 from tax year 2011. That form was not utilized last year and it is telling us that we must file it now. We are not even sure how to get the numbers it is asking for. We would like to get the AMT credit, but would like to do it properly. Any suggestions?

11:21
JACK ANGEL: HI Holly,
The AMT is one of the most confusing items in tax law. Unfortunately, it applies to many NYers due to our high income & real estate taxes. Generally the AMT credit is caused by timing differences, such as reporting stock options, in a prior year, Generally most taxpayers do not qualify for the AMT credit. There are, however, some credits permitted for AMT purposes such as the child credit or education credits.

Jack Angel

11:23
Comment From mary
How are federal tax exempt lt cap gains and qualified dividends treated on NY State taxes?

11:23
Bob Schaffer CPA: Municipal bond interest that is exempt for federal purposes is also exempt for NY if it was from NYS obligations. Qualified dividends are taxed at the regular NY tax rate.

11:24
Comment From kevin
Why is my first social security taxable since I have been paying into the fund for over 40 years. Am I not getting my money back, that has already been taxed. I feel I'm getting taxed twice.

11:24
Elizabeth A. Vuozzo CPA: Hi Kevin I know it feels that way, but that is not how it works. The social security you received may be taxable. There is a calculation and it is based on all of your income.

11:28
Comment From Debbie
My 19 year old son has been in the military for 6 months out of 2012. How do I claim him on my taxes for the 6 months he lived with me? Can I still claim him? We use turbotax when we file our taxes.

11:28
JACK ANGEL: Hi Debbie,
Based on the brief facts provided, you can not claim your son as a dependent. Since he is 19, you cannot claim him he earned more than $3800 in 2012 and you may not be able to establish you provided more than 1/2 of his living expenses.
Jack Angel

11:28
Comment From Rich
Can I claim non-recoverable depreciation for 2012 from my insurance settlement from Sandy? In 2012 I paid for storm damage repairs for which I received partial insurance reimbursement in 2013. Do I claim the losses in my 2012 returns? Then what for 2013 taxes?

11:31
JACK ANGEL: Hi Rich,
Yes, casualty losses are permitted as a deduction on your return, do not forget to factor in the reimbursement received in 2013.
Jack Angel

11:31
Comment From Marlene
I am 51% owner of a 'family' business which has paid me virtually nothing in 2012 while the 'working' partner gets whatever profits are being made. Can I use this deficit as a deduction, as I have had to touch savings to make up the lack of income?

11:32
Don Crotty, CPA: Hi Marlene. Do you work in the business? If you did you should generally get a W-2 for your services. If you just own a portion of the business, then it gets a bit more complicated. It would depend legal structure of the company. You may have to pick up your share of the net income from the business on your personal return. Unfortunately, using other personal savings to supplement income will not give you any deductions, but if you are using personal funds to pay for business related expenses, you may be able to deduct those expenses if you do not get reimbursed from the business.

11:33
Comment From john mac
We filed a causality loss in 2011 with hurricane Irene because our insurance company denied out claim. We later sued and won a settlement and received a check for a partial amount. Do we need to file this settlement and for what year? Do we owe taxes on it? We also had further damage to our property (drainage system...from the flooding) which we didn't include in our causality loss. Is that eligible? We also had some damage that wasn't covered in Sandy. Is that eligible for a loss?

11:37
Moderator: Sorry for the delay, due to technical issues we may be a bit slower answering questions, but no worries we're still here...

11:37
Elizabeth A. Vuozzo CPA: The settlement you received should be reported in the year you received it. In addition the other losses may be deductible as casualty losses. You should consult your personal tax adviser.

11:38
Moderator: Newsday reporter Ted Phillips wrote a recent story regarding LI property owners filing deduction claims from Sandy. Read more here: http://bit.ly/15s7uhY

11:40
Comment From JOSEPH A
RECEIVED BOND INTREST FROM BANK OF AMERICA WITH MY NAME BUT DIFFERENT SOCIAL. DO I STILL CLAIM AS INTEREST?

11:40
Bob Schaffer CPA: It depends on whose interest income it is. If it is yours, you need to report it. If it is a child's or other relative's interest they should report it unless you elect to report the income of your child. Since it has your name on it I would report it and back it out letting the IRS know who is reporting it, if it is not yours. I would make sure it is corrected with the bank so the name and Social Security number matches.

11:40
Comment From john
can advisor fee's that are paid from the account on qualified and non qualified ira's be deducted?

11:41
JACK ANGEL: HI John,
The IRA fees are deductible if you pay them from other than an IRA account. In addition, this category of deductions are classified as miscellaneous itemized deductions and are deductible only when they exceed 2% of your Adjusted Gross Income.
Jack Angel

11:45
Comment From Dan
My daughter is 33, lives at home with me. She made 17,000 in 2012. I pay for all of her expenses including Medical insurance which is 4,000 for year. I can not declare her as a dependent. My question is can I deduct the Medical insurance payments on my tax return Thanks

11:45
JACK ANGEL: HI Dan,
There is a limited opportunity to claim her medical expenses: you have to meet all of the tests to claim her as a dependent except for the gross income test. You must prove you provided more than 1/2 of her living expenses for 2012.
Jack Angel

11:46
Comment From Joe C
Can I write off the cost of Eastman Kodak stock now that the company is bankrupt

11:46
Bob Schaffer CPA: The stock would need to actually be worthless. You would need to sell it or try to sell it. If you are unable to sell it you would need a letter from a broker or something saying that the stock has no current value.

11:48
Comment From Newsday reader
CPA's, seems to me these people should not be doing their own taxes, the ads for tax software make it seem your taxes can do themselves, but much knowledge is needed even with the tax programs.

11:51
Comment From Jose
I purchase a new home late 2012. Which items from the HUD closing document can i deduct for my 2012 taxes?

11:51
Bob Schaffer CPA: You can deduct any real estate taxes you paid but you have to reduce thereal estate taxes you are deducting if you were credited for any tax you previously paid. Any mortgage interest and points would be deductible but they should be reported to you on Form 1098.

11:52
Comment From Gina
During 2011 my husband exercised and sold some of his employee stock options (both in the same year), as we needed the cash right away to pay for household expenses. As a result we had to pay AMT for the first time because the sale of the stick options pushed us into a higher tax bracket. We don't need to pay AMT for 2012 because our combined income no longer meets the threshold for AMT. Is any of the AMT we paid for 2011 refundable for 2012?

11:52
JACK ANGEL: HI Gina,
Difficult area of tax law you are touching on. If the AMT paid in a prior year is caused by a timing difference, such as the reporting of stock options, it can be used to reduce your regular tax liability in later years. You may need to consult with a CPA to assist you with the computation of the credit.
Jack Angel

11:54
Moderator: Readers, get additional tax tips and links to all your filing forms here: http://bit.ly/15K6CFu

11:54
Comment From Lucy Fenech
Is there a way to recoup the thirty five hundred dollars I had to lay out in insurance deductibles for both my house and cars due to Hurricane Sandy damage?

11:54
Don Crotty, CPA: Hi Lucy. You may be able to deduct a casualty loss on your tax return. The loss is generally equal to the difference in fair market value of the property before the damage and the fair market value of the property after the damage. Take that amount and subtract $100. The net loss must now exceed 10% of your total gross income for the year. Usually, this is the biggest hurdle. So if your total income from wages, interest, etc. is $70,000, then the casualty loss is only deductible to the extent it exceeds $7,000 ($70,000 income x 10%). If the total losses are say $10,000, then your tax deduction in this example is $3,000. You must exclude any losses that were reimbursed by the insurance company.

11:56
Comment From toni
Hello to all. Please tell my why my 24 year old, full time graduate student daughter who lives in our home is no longer our dependent. Why do they hold onto that over 23 rule, when kids nowadays continue going to school past undergrad.

11:56
Elizabeth A. Vuozzo CPA: Hi Toni, your 24 year old daughter can still be your dependent, she will fall under the qualifying relative definition and have will have to meet the requirements of relationship, gross income and support.

11:59
Comment From Guest
I do not itemize deductions. Last year I received $9655 from my IRA and I contributed $1270 to charities. Can my taxable income be reduced by the charitable contribution?

11:59
Elizabeth A. Vuozzo CPA: If you do not itemize deductions you will not be able to reduce your taxable income with your contributions to charity.

11:59
Comment From Guest
Good Morning. I purchase a new home during 2012 yr which item from the Hud closing document, can i deduct for my 2012 taxes?

11:59
JACK ANGEL: HI,
The items you can deduct are interest expense, points paid to lender , mortgage insurance required by the lender and real estate taxes. The lender should send you form 1098 showing the aforementioned items.
Jack Angel

12:02
Comment From Maryann
My parents took money from their annuity with Banker's Trust and received a 1099-R with no federal tax withheld...is that amount totally taxable?

12:02
Bob Schaffer CPA: The 1099-R may tell you the amount taxable in box 2a. If the box is checked that the taxable amount is not determinable, you should have received a statement from Banker's Trust or should contact them to get the amount that is taxable.

12:04
Comment From Guest
I purchased a second home in Dec 1999 for the price of $159900, I used the home for rental purposes for seven years and claimed depreciation. I sold the in Oct 2012 for the price of $284000. I invested 63344 in to the home for improvements and after the cost of sale ended up with a capital gain of $38486. Do I also have to claim recapture of depreciation and pay capital gains tax. Thank You Bob

12:04
JACK ANGEL: HI Bob,
Unfortunately, the accumulated depreciation claimed has to be subtracted from your investment in the property sold. In addition, it is classified as Unrecaptured Section 1250 Gain, taxed at a higher rate of 25%.
Jack Angel

12:07
Comment From Guest
I was issued stock options in 2010 and cashed them in 2012. It appeared on my w-2 and I was taxed via payroll taxes. what cost basis do you use? Is it the one that appears on the 1099?

12:07
JACK ANGEL: Hi,
Generally your cost basis is the same amount included on your W-2, plus or minus a few dollars.
Jack Angel

12:07
Comment From Disabled Widow
Hubby rec'd $25K in SSDI, I rec'd $5K in SSDI, his student loan was forgiven due to disability $6300. He DIED in 2012. Now what? Do I owe for the student loan? How should I file? Do I owe anything? I am under age 65.

12:07
Elizabeth A. Vuozzo CPA: It appears that you have you do not have a filing requirement with the information you have provided.

12:08
Comment From toni
wouldn't my share of the health ins be considered after tax as it is deducted directly from my pay.?

12:08
Bob Schaffer CPA: It depends if your health insurance is deducted pre-tax or after-tax. Your employer could have a Section 125 cafeteria plan where the insurance premiums reduce your reportable salary so you are not taxed on that amount as income. Therefore you cannot deduct the premiums.

12:10
Comment From Mike R
As an independent contractor paid on a 1099, should my w2 include expense reimbursements?

12:10
Don Crotty, CPA: Hi Mike R. It depends on how you account for those expenses where you are seeking reimbursement. If you provide an invoice to the company with the expenses listed separately, then the company would not include the reimbursement of those expenses in your 1099. If you just issue an invoice for the total amount of your services and the expenses with no breakout, then they would include the costs in your 1099. If they include the expenses in your 1099, then you would get to deduct the expenses on your tax return. If not, then you would not deduct those expenses.

12:14
Moderator: We have another CPA joining us now, she is ...

12:14
Jill Scher, CPA: Hi, my name is Jill Scher. I'm a CPA with Marcum LLP in Melville, New York.

12:15
Comment From LI
Hi, with an AGI of $155,000 and two kids in college with 1098 tuition totalling over $35,000 how much in tuition credit can I claim on my fed and NYS return. What is the most appropriate tuition credit or deduction should I take?? When I add these amounts into my tax pgm it only shows a $2,0000 credit on line 34. thanks very much

12:15
Elizabeth A. Vuozzo CPA: Tuition credits like the American Opportunity credit are phased out when AGI is between 160,000 andn180,000 for joint filers. Without additional information I cannot advise you.

12:17
Comment From chris
I was disabled for all of 2012.Last week I received a retroactive award from SS. Does this award go on my 2012 return or 2013.

12:17
Elizabeth A. Vuozzo CPA: Chris your award is claimed in the year you receive it.

12:17
Comment From Guest
What is the proper way to determine business mileage? I work in two offices and sometimes travel between them. Additionally, I visit clients prior to going into the office. How do I calculate my "commuting miles" vs business mileage?

12:17
Bob Schaffer CPA: Commuting is generally the trip between your residence and your first stop, assuming it is in the area of your home or where you usually work. Business travel after your first stop is deductible except from your last business location to your home.

12:20
Comment From Paul
I turned 71 on 12/28/2012. I then opted to take the first IRA Min. deduction this year, 2013. Since I recieved the min. deduction in 2013, I assume that I do not report this on 2012 tax return, but report that both min. deduction and the min deduction for 2013, to be reported on 2013 tax return. Is this correct ? Thank you

12:20
Elizabeth A. Vuozzo CPA: The distributions from your IRA are reported in the year you receive them. Therefore your 2012 required minimum distribution received in 2013 is reported in 2013.

12:22
Comment From Leticia
hi i won $1,000 on lottery on what line on my 1040 do i claim gambling wins or losses and do i need a separate form? thank you

12:22
Don Crotty, CPA: Hi Leticia. Congratulations! You would show this income as "Other income" on your tax return. If you had any gambling losses, you would report these as Itemized deductions not subject to the 2% limitation. The gambling losses can not exceed the gambling winnings. You must be able to show proof of the gambling losses deducted.

12:22
Comment From Mike R
If I am being paid on a 1099 as an independent contractor, should my W2 form include expense reimbursements?

12:23
Jill Scher, CPA: To answer your question, Mike, an employee and and independent contractor must be distinguished. An independent contractor will receive a 1099, an employee will receive a w-2.

12:26
Comment From Tom T
1.Can a Fed &/or State refund be deposited into a Roth IRA regardless of how it was generated ?(ex. overpaymentof taxes on a municipal pension & Soc Sec bebefits. 2. After an RMD is received & taxes paid , can a contribuition from these monies be made to a Roth IRA (these distributions were from "Earned Income $" on an IRA & 401K) Thank you

12:26
JACK ANGEL: Hi Tom,
You need earned income in 2012 to make a contribution to IRAs.
Jack Angel

12:28
Comment From Jim H.
Thank you for your help. I inherited a home from my father in 2012 via a trust, he passed Dec 2011. I purchased the home from the trust in 7/31/2012. My brother and I were the beneficiaries of the trust so I just had to buy out his share. I paid the real estate taxes for all of 2012 because I was living there at the time, but did not own the home till 7/31 at closing. Can I claim the full year taxes as I would have been legally responsible for them as the trust benef. My brother paid none and would not claim them.

12:28
JACK ANGEL: Hi Jim,
Yes either the trust or you can claim the real estate taxes.
Jack Angel

12:31
Comment From jm
Can you deduct private school from your taxes? kids are in pre-k and 1st grade

12:31
JACK ANGEL: Hi JM,
Yes the pre-k tuition can qualify for the Child Care Credit, provided both parents are employed in 2012.
Jack Angel

12:31
Comment From Margaret
Hi. My child turned 24 years old on 12/5/2012 can we claim her as a dependent for 2012?

12:31
Jill Scher, CPA: Hi Margaret, in order to claim your child as a dependent for a tax year, they must be under the age of 19 at the end of the calendar year, under the age of 24 at the end of the calendar year and a full-time student, or totally and permanently disabled at any time during the tax year, regardless of age, and must be younger than the taxpayer. If your child turns 24 prior to end of the year, he or she will not qualify.

12:34
Comment From jm
we had a causality loss in 2011 with Irene because our insurance company denied our claim. We sued and won a settlement (received a check from our lawyer in jan 2013) Is that money taxable? Do we need to file? What year if it is? Are the lawyers fees deductible (took 33%)?

12:34
Elizabeth A. Vuozzo CPA: The settlement you received is taxable income and should be reported in the year you received it. The legal fees are deductible since they are related to taxable income and should be reported in miscellaneous deductions.

12:36
Comment From baba booey
Can you still claim new children born in 2012? What is the a
mount for my child ??

12:36
Bob Schaffer CPA: Yes. You would receive a deduction of $3,800. You may also be eligible for up to a $1,000 child tax credit depending on your income.and filing status.

12:37
Comment From Milt
I do not itemize deductions. Part of last year's income was from my IRA. Can my taxable income be reduced by my charitable contributions?

12:37
JACK ANGEL: Hi Milt,
Generally you must itemize deductions to be able to claim a deduction for charity paid to qualified organizations. The rule you appear to be referring to requires that the distribution from your IRA be paid directly to the charity.
Jack Angel

12:38
Comment From Sam
I am an employee who travels between two local offices and also sometimes visits clients prior to going into either office. How do I determine business mileage and commuting mileage?

12:39
Don Crotty, CPA: Hi Sam. Do you get reimbursed for any of your traveling from your employer? If so, then, none of the mileage costs are deductible on your personal return. Let's assume that your employer does not reimburse you. In this case, only the "business" mileage is deductible. Commuting back and forth from home to the office (either office in your case) is considered "personal" mileage and is not deductible. Traveling from home directly to the client is also considered personal mileage (again, not deductible). However, traveling from one office to the other office is business mileage. Traveling from one office to a client (or vice versa) is also business mileage. If you can, first go to the office, then go to your client to make the mileage business mileage. The business mileage deduction is equal to 55.5 cents per mile for 2012 and 56.5 cents per mile for 2013. You must keep a log of your mileage showing the dates traveled, the miles driven, and the business purposes.

12:40
Comment From Margaret
My mother passed away last year. The deed to the old homestead is in my brother's and sister's names. My mother's bank account was a joint checking account with me, and was changed to my name alone after she passed. I paid the property taxes out of this account in 2012 for the old homestead. My question is, is the property tax payment deductible on my tax return for property that is not in my name?

12:40
JACK ANGEL: Hi Margaret,
No you can not claim the real property taxes on property you do not own.
Jack Angel

12:42
Moderator: Folks, we're getting a lot of great questions coming in...please bear with us, we're answering as quickly as we can.

12:45
Comment From robbie
I paid off outstanding bills when I sold my house 2 years ago. I recently paid the last one, and yet, this is the firet time I received form 1099-C (cancellation of debt). Do I need to include this when I file?

12:45
Bob Schaffer CPA: It sounds like you paid off the debt and it was not forgiven. You should contact whoever issued the 1099-C to you to find out why it was issued. It may have been issued in error, especially if you later paid the debt. They can issue a corrected form. If they won't correct it and you believe it was issued incorrectly I would report it and then back it out stating that it was paid.

12:46
Comment From Harold
I am looking to claim a casualty loss for my hurricane sandy damage. Would it be reasonable to take the insurance company estimate of damage, deduct the amount they paid and claim the balance on my return?

12:46
JACK ANGEL: Hi Harold,
A better measure may be the repair costs. Using the insurance company's estimate of the damage is also acceptable. The loss in excess of insurance reimbursement is deductible to the extent it exceeds 10% of your income.
Jack Angel

12:46
Comment From Susan
We had $12,000 of damage to our boat from Sandy. Can we deduct what is not covered by insurance, and can we deduct the insurance deductible?

12:47
Don Crotty, CPA: Hi Susan. Yes, you can generally deduct the losses not covered by insurance. However, there are thresholds that you have to meet to see if any portion is deductible on your tax return. The biggest hurdle is the unreimbursed loss must exceed 10% of your total income. This includes wages, interest, etc. So if your income is say $100,000, then the loss must exceed $10,000 to be deductible. If your loss is under that amount, then you will not be able to deduct the loss. If the unreimbursed loss is say $12,000, then only $2,000 is deductible in this example.

12:50
Comment From Toni
to Elizabeth re 24 year old. She is on a graduate fellowship, so would be over the income rule, but she contributes nothing financially to the household.

12:50
Elizabeth A. Vuozzo CPA: If the income is over 3800 she will not qualify.

12:50
Comment From Joe
Hello, My parents put their home under my name and my brothers name.(Name on the title) They are still paying the taxes and home insurance(no mortgage on the house). Do I need to claim anything in my taxes? FYI I have my own home with a family and 2 girls.

12:55
Comment From Bart
my child turned 13 a month before he attended day camp in 2012 at a cost of $3,700. My wife and I both work so day camp was our summer child care. Can I claim that $3,700 as eligible child care expenses on form 2441 even though he was age 13 when he attended day camp in 2012? My tax software (HR Block At Home) is allowing the credit. thanks

12:55
Jill Scher, CPA: Hi Bart. In order to claim your child's camp expenses as eligible expenses on Form 2441, Child and Dependent Care Expenses, your child must be a dependent under the age of 13 when the care is provided. It sounds like your child turned 13 prior to camp so you may want to reevaluate your tax software's allowance of the credit.

12:55
JACK ANGEL: HI Joe,
Since you are the owner of the home you can claim expense for real estate taxes you have paid. On occasion, however, your parents may be able to claim the expenses if they retained a "life estate" on the deed that transferred ownership..
Jack Angel

12:56
Comment From Guest
when will the IRS start accepting returns from ppl who have claimed college expenses for their children?

12:56
Elizabeth A. Vuozzo CPA: The IRS is currently accepting these types of returns.

12:56
Comment From Kristin G.
Good morning. Until last year I used an accountant to do my taxes. Last year I used Turbo Tax. I'm single and own my own home, no children and only have to pay my land taxes. I have a small amount of money in my bank account and have a financial planner to oversee my investments. I want to be sure I'm taking all the deductions I'm entitled to take. Should I go back to the accountant or is Turbo Tax sufficient?

12:56
Don Crotty, CPA: Hi Kristen G. There are several different things to consider in your situation. Do you have a mortgage? If so, the mortgage interest and possibly the PMI is deductible. As you know the real estate taxes are also deductible. Did you make any improvements to your home to make it more efficient? There may be tax credits that you can take. You can deduct the financial planner fees as itemized deductions. The planner should be aware of your tax situation to make sure their planning is being done in a tax efficient manner. Compare the return you prepares yourself with the one prepared by the accountant. See if there any differences. This may help identify things that your accountant did that the software wasn't aware of.

12:57
Comment From Guest
I entered by checking account info incorrectly on tax return. IRS website says my refund was deposited on 2/20. Is it going to be possible to recover the refund? I guess I should cont
act IRS?

12:57
Elizabeth A. Vuozzo CPA: You should definitely contact the IRS and report the issue.

1:01
Comment From Patrick
Hi, I retired in June of 2012 (62), but my wife (who is 7 years younger than I am) continues to work. Can she claim me as a dependent on our Joint Tax return?

1:01
Don Crotty, CPA: Hi Patrick. Unfortunately, no. You would each get a personal exemption deduction on your joint tax return, but she would not be able to claim you as a dependent.

1:02
Comment From Guest
hi. my parents were left homeless after superstorm sandy and they lived with me till their home was fininshed. do i get a deduction for that?

1:02
JACK ANGEL: HI,
Generally no. To qualify to claim your parents as your dependents they can not have taxable income of $3,800 per parent. In spite of my negative answer, it is my honor to respond to such a caring person and for you to payback, at a time of their need, all that our parents do for their children.
Jack Angel

1:03
Moderator: Newsday freelance writer and personal finance specialist Lynn Brenner answered readers questions regarding Sandy deductions in a two part response that you can read here. PART 1: http://bit.ly/V1unWm PART 2: http://bit.ly/X6xhcz

1:03
Comment From Mom
My son was a student in 2011 and 2012 and received a 1098T for 2012 for a grant he received. All his tuition was billed in 2011 and was completelly paid by loans and grants. He did not work in 2011 and did not file taxes, he is an adult and was not claimed as a dependent on anyones taxes. The 1098T on;y lists the grant in box 5. No other boxes are filled. Can he use some of the tuition billed in 2011 to offset the grant received? Can he claim the education credit? Thank you for your help.

1:03
Bob Schaffer CPA: I would see if the college will correct his 1098Ts for 2011 and 2012 to eliminate the timing difference. There should be an amount billed in Box 2 that would offset this amount. If not, I would report the amount as income and back it out as an amount billed in the prior year. He would not be eligible for an education credit since nothing was paid this year.

1:07
Comment From Greg W
I had read somewhere that the IRS rules may change for Sandy relief to not make the Casualty loss subject to a 10% deductible limit on the 1040 - do you have any update ??

1:07
Elizabeth A. Vuozzo CPA: As of today, there has not been any change to the 10% limit

1:10
Comment From Greg W
I haven't filed my tax return in 3 years... but in 2008 (return not yet filed), I have a refund I would like to credit to 2009 and so forth... I understand my refund might be dissalowed. Are there any solutions or recomendations to assist ??

1:11
Bob Schaffer CPA: You cannot claim a refund after 3 years from the original or extended filing due date. My recommendation would be for you to file your 2009 return by April 15, 2013 if you did not file for an extension for that year so you are able to get that refund if you have one.

1:15
Comment From Rick
I know need to claim state and local taxes paid on Schedule A. I also paid state taxes as I owed money. Do I have to deduct that payment from my state taxes this year?

1:15
Don Crotty, CPA: Hi Rick. The first part of your question relates to deducting state taxes on your federal return. You can deduct state income taxes paid in 2012 on your 2012 federal tax return. These are "itemized deductions". This would include 2012 state withholdings, balances due with your 2011 return paid in 2012, any estimated tax payments paid in 2012, or other state income taxes paid in 2012 for earlier years. The second part of your question seems to ask about what you can deduct on your state tax return. Generally, you can apply "payments" made for 2012 state taxes on your 2012 state tax return. This would include 2012 state withholdings, any estimated tax payments made during the year specifically for 2012, and any payment made if you file for an extension to file your 2013 tax returns.

1:21
Comment From Guest
Can I claim my phone as a job expense? I am a social worker on the road and use it to call clients, search internet with them, as well as have the emergency line at least a month long each year. I read that it has to be stated in my job description that it is a necessity in order to claim it.

1:21
Jill Scher, CPA: In general, to claim a deduction for the depreciation of your cell phone you must be able to prove that you use the cell phone in your position as an employee and the use of your cell phone is for the convenience of your employer and a condition necessary for your employment. It sounds like you may have a good case for a deduction, but I would closely examine your arrangement with your employer to be sure.

1:22
Comment From Rob K
I wrote a check for my daughters tuition that was the full cost minus the money that the school gave her. She received 1098T in HER name for the full amount of tuition(including the $$ the school gave) Can I write this off? We did have a 529 account for her. Thank You

1:22
Bob Schaffer CPA: Assuming your daughter is a full time student under 24 and your dependent, you can either claim the tuition deduction or the tuition credit, depending on any limitations that might apply based on your income. Any withdrawals from a 529 plan would reduce the amount qualifying for the deduction or credit.

1:29
Comment From Mike
Qucik Question regarding a Direct Rollerover IRA from a previous 401K. If you withdraw your money on 3-1-13 and you are under the age of 59.5, when are taxes and the 10% penalty due?

1:29
Elizabeth A. Vuozzo CPA: Monies withdrawn form a IRA are taxable in the year they are received and the income will be reported on your 2013 taxes. The IRS expects that your taxes are paid ratably during the year. If you do not, you could be subject to underpayment and under estimation penalties

1:32
Comment From Rachel
I got married in June. Can we file jointly, as married, for the entire year?

1:32
Elizabeth A. Vuozzo CPA: Hi Rachel, if you were married in June of 2012, you can file jointly for 2012.

1:33
Comment From Patrick
Hi, my wife and I sold an investment property (residential condo) we had owned for the past 15 years. It is mortgage free and we "gained" about $150k from the original purchase price. How long do we have to buy another residential property before the gain is taxed (as income at the 25% tax bracket I am told)?

1:33
Don Crotty, CPA: Hi Patrick. Was this property a rental property? If so, you probably deducted depreciation over the years. This will also affect what he true gain is on the sale of the property. It sounds like you sold the property for $150,000 more than what you paid for it, but if you took deductions, you gain may be higher. Remember to include costs to improve the property and to sell the property when calculating the gain. If you sold the property in 2012, you will need to report the gain on your 2012 tax return. There are ways to "defer" the gain if you purchase another rental or investment property within a certain time period, generally 180 days. This is called a "like kind exchange". This is a great way to defer income, but there are very specific rules on when you identify the new property and when you purchase the new property. The 25% tax bracket applies if you deducted "depreciation" on the property. This would apply if it was a rental property. If it was not a rental property, then it will be taxed at 20%.

1:37
Comment From informedLI
Can I claim COBRA payments for my family health insurance as a deduction? I've paid $18,564 in health insurance payments this year, and $3,183 in co-payments, deductibles and co-insurance on top of that.

1:37
Elizabeth A. Vuozzo CPA: Your cobra payment for health insurance are deductible medical expenses, as well as your co-payments, deductibles and co-insurance. Please be aware however the medical expenses are itemized deductions and must exceed 7.5% of your adjusted gross income.

1:37
Comment From hazelnutt30
I qualify for head of household this year (my husband moved out 20 months ago and the divorce is not final yet) and would like to know if I can itemize my deductions even if my husband takes the standard deduction.

1:38
Jill Scher, CPA: If you otherwise qualify for the Head of Household filing status, which you may possibly as your husband has not lived in the same residence for more than six months of the year,(your situation is 20 months), even though your divorce is not yet finalized. Keep in mind though that there are other requirements for this status including that you must have maintained a household which for more than one half of the tax year, is the principal place of abode of a qualifying individual who is a member of the household. A qualifying individual may be a qualifying child or dependent. To answer your question, with the Head of Household filing status, you may itemize or take the standard deduction, depending on which is more beneficial for you regardless of what your husband chooses to do.

1:41
Comment From Mike R
Mr. Crotty, Thank you for your response, one quick question though. If the expenses are left on, is it industry practice to charge an additional fee for deducting the expenses in preparing my tax filing?

1:41
Don Crotty, CPA: Hi Mike R. I haven't heard of contractors charging an additional fee for the administration of the expenses. That said, if the company agrees to pay you the extra fee, then that would just be additional income to you. I'm not sure if the company would agree to this if the expenses are small and / or infrequent, but if you are incurring a lot of time or costs to track the expenses on the company's behalf, then it's certainly worth having a discussion with the company.

1:47
Comment From Rob K
If all the money came from a 529, can it be deducted?

1:47
Bob Schaffer CPA: No there would be no qualified tuition expenses left to use for the deduction after the 529 distributions reduce them. You can look at Pub. 970 on the IRS website at irs.gov.

1:49
Comment From Donnybear7777
I'm currently unemployed & searching for a job. I was unemployed all last year and had to tap my 401K in order to pay the mortage & bills. As of today, I only have enough 401k to pay for one more month's mortage payment. My unemployment runs out next week. My wife is unable to work, I still have 2 kids in school. I am age 50. I had quite a bit withheld from my distributions, but not enougth. I prepared my tax returns via Turbotax and found that I owe 10K+ to the IRS & 9K+ to NYS. There is no way today, that I can pay this. Do I file now? Wait until 4/15, when I might at least have a part time job (if I'm lucky)? How do I deal with IRS/NYS?

1:49
Elizabeth A. Vuozzo CPA: I recommend filing now. You want to minimize penalty and interest assessments. There are payment plans available with the IRS and NYS. It may be beneficial to open a dialog with the taxing authorities. If you don't feel you can do this you should contact a tax professional to assist you with this matter .

1:50
Comment From Jen
It seems like NYS has a much more beneficial credit for tuition than the feds. Especially with 2 in college and AGI near $140,000. Is that correct?

1:50
Don Crotty, CPA: Hi Jen. Unfortunately, yes. The federal tax incentives phase out once income exceeds certain levels. NYS allows you to claim a credit or deduction on tuition, even at some of the higher income levels. Here is a link to the NYS website for more information about the NYS tuition incentives.

http://www.tax.ny.gov/pit/credits/college_tuition_credit.htm

2:01
Moderator: While we're waiting for the CPAs to answer more of your questions, take a moment to weigh in on our business poll. Do you think the state should have a say in how local IDAs hand out tax breaks? Answer here: http://bit.ly/15eG128

2:02
Comment From Margaret
if my child turned 24 at the end of 2012 but was a full time graduate student december 2012 can we claim her as a dependent?

2:02
Elizabeth A. Vuozzo CPA: Your child can qualify as an other dependent if she meets the other tests of income, relationship and support

2:04
Comment From scott
can you deduct uninsured sandy losses as casualty losses??

2:04
Elizabeth A. Vuozzo CPA: Yes you can. See the IRS publication 551

2:05
Comment From Keith
My wife has been on UI since June 2012 and our child attends a pre-k/daycare during the week. Do we still qualify for the child care credit?

2:05
Jill Scher, CPA: Hi, Keith. In general, when a couple files married filing joint and one member of the couple does not work, the IRS may not allow the full credit, unless certain exceptions are met. These include one spouse being a full time student, or sick or disabled. In addition, if a taxpayer has eligible child care expenses during the year while they are employed and then lose their employment they may remain eligible. Note that qualifying child care expenses include expenses paid for household services and for the care of a qualifying individual that allow the taxpayer to work or look for work.

2:05
Comment From Guest
Hi, I own a multi-family rental property with someone else at 50% each. In mid 2012 I bought the second half from the other owner. The question is where can I add the sale amount as a deppreciation? Thanks Al

2:05
Don Crotty, CPA: Hi Guest. Do you own the rental property in a partnership or an LLC? If so, the partnership would calculate the additional depreciation on form 4562. If you (and the other owner) owned the property directly, and reported the rental income and expenses on Schedule E of your personal return, then you would calculate the additional depreciation (also on form 4562). The additional depreciation is based on the purchase price you paid for the other 50%, plus any other acquisition costs. The depreciation on the 2nd half of the property would start on the date of purchase and would be depreciated over 27.5 years. As a side note, if you own the property directly, then I suggest forming a limited liability company (LLC) and transferring the ownership to the LLC. This doesn't change the income tax reporting, but it greatly reduces your legal liability.

2:07
Comment From elaine f
when will the irs start accepting returns from people who have claimed college tuituion and expenses?

2:07
Elizabeth A. Vuozzo CPA: The IRS is accepting them now.

2:08
Comment From Bart
Mr. Schaffer - Can you explain this? Any withdrawals from a 529 plan would reduce the amount qualifying for the deduction or credit.

2:08
Comment From Rick S
It was my belief that the 529 Plan Withdrawal which is a federal/State tax free benefit (for any growth) would not have any impact on the tuition credit. Even for the NYS Tuition Credit or Itemized deduction amount. can you clarify or confirm?

2:08
Bob Schaffer CPA: You may still be able to take the tuition deduction or credit if you are eligible to take one of them but that may cause a portion of a 529 distribution to be taxable. Please refer to Pub. 970 on the IRS website at irs.gov.

2:09
Comment From Bart
thanks all- very helpful !!

2:16
Comment From Toni
CPA's Aren't there some exceptions to the penalty for early withdrawal under dire circumstances?

2:17
Jill Scher, CPA: Hi Toni,
In general taxable distributions from a qualified retirement plan or IRA are subject to a 10% additional tax penalty if they are made prior to the participant reaching age 59 1/2. There are many exceptions in which this penalty will not apply, including, 1- those rolled over into another IRA or qualified plan, 2- distributions made upon death or disability of participant, 3-distributions made under a QDRO, 4-distributions not exceeding deductible medical expenses, 5-distributions made on account of the IRS's levy against the participants account. There are other exceptions as well and these may be found on Form 5329, Additional Taxes on Qualified Plans. This is also the form utilized to report this tax and/or provide information related to the exception.

2:19
Moderator: That concludes our tax chat for today, everyone! Thanks for all the wonderful questions -- we hope our CPAs answers were helpful to you. Don't forget to join us for the second installment of our tax chat focusing on filing for small businesses tomorrow night from 6 p.m. to 8 p.m.

2:19
Moderator: The certified public accountants assisting in the Tax Help live webchat hosted by Newsday can answer general questions, but the answers are not a substitute for individualized advice and guidance from a professional Tax Advisor who is hired by you and has full knowledge of your specific circumstances or needs. Newsday makes no representations or warranties of any kind as to information given by the Tax Help accountants, and under no circumstances will it or the accountants be liable to any participant or other person for damages of any nature arising in any way from the use of such information. 

Tuesday, Feb. 26, 2013

LIVE CHAT TRANSCRIPT