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Author: mneakrase Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121351  
Subject: Need help! Date: 4/16/2003 4:14 AM
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Hello all!

I've already filed for an extension on my taxes. So here is my problem. I had too little tax witheld and now I owe a bunch of money. I am trying to find more deductions in order to lessen the amount I owe.

Last year dh and I made 32k, I've already got in the Student loan interest deduction, and the retirement savings contributions credit. Talking with some co-workers they mentioned a Rental credit. We currently rent an apartment. Can anyone tell me about any deductions I might not know about or can anyone tell me about this mysterious Rental credit?

I would appreciate any and all help you could give me.
Oh and yes, I've already changed my W-2's and dh is changing his tomorrow so this will not happen again next year.

Thanks so much,
Megan
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Author: pmarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65054 of 121351
Subject: Re: Need help! Date: 4/16/2003 4:59 AM
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Talking with some co-workers they mentioned a Rental credit. We currently rent an apartment. Can anyone tell me about any deductions I might not know about or can anyone tell me about this mysterious Rental credit?

In Federal taxation this is the illegitimate sibling of the Bark at the Moon Credit. IOW, ain't no such thing. However, the endless special provisions in state tax laws never cease to amaze me. Check with those co-workers for more information--there may be something there at the state level.

Phil

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65055 of 121351
Subject: Re: Need help! Date: 4/16/2003 7:19 AM
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I've already filed for an extension on my taxes. So here is my problem. I had too little tax witheld and now I owe a bunch of money. I am trying to find more deductions in order to lessen the amount I owe.

I think you may have a different problem that you don't realize. While you got an extension on filing your taxes, it doesn't include an extension on paying your taxes so you're starting to accrue at least interest at the moment, if not penalties.

rad


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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65056 of 121351
Subject: Re: Need help! Date: 4/16/2003 10:10 AM
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You have two problems and this discussion is limited to only the amount of penalty due to underwithholding (problem #2).

First: You owe 2002 taxes which start accruing interest and penalty starting on 4/16/03. To stop the interest and penalties pay the shortage ASAP. Resetting your withholding for 2003 is an obvious necessity but can't correct these problems. I hope you can find more to deduct to reduce the taxes owed.

Second: You owe interst (penalty) for underpaying your taxes (not enough withholding in 2002). However, if you owe less than $1,000, there is no penalty. If you withheld at least as much as 2001 total taxes, no penalty, or if you withheld at least 90% of 2003 taxes, no penalty. I think CA penalties are similar.

The penalty is 5% simple interest on how much you missed these marks (except the $1,000). The first page of IRS form 2210 will show you the amount of penalty the IRS will calculate for you in the "Short Method".

You can reduce the penalty if:
1. you made the payments leading to your deductions ( or enough to get the full deduction) in the early part of the year (such as a capital loss carryover or retirement savings deposit), or
2. Your income was higher in the later part of the year (such as from mutual fund distributions or a bonus), or
3. You had more withholding in the early part of the year.
To take advantage of #1 oro #2 you need to complete form 2210 Schedule AI. For #3 you need to apply withholding in the quarters withheld instead of averaged over the year, an option on form 2210. If #2 was due to a bonus, #3 probably isn't going to be to your advantage.
You may be able to use all 3. There is a FREE demonstrator you can download to calculate the first quarter of the 2210 AI for either year, 2002 or 2003 at http://www.edcosoft.com/qitc.html Although the program was designed to compute future installments for self employed or retire taxpayers, it will work for computing the effect of #1, #2 and #3 above for last year. IF the program readout shows a first quarter required installment (or withholding) due of less than the displayed safe harbor amount, using the AI will reduce your penalty. Your tax program will prepare the forms for you or you can register the program to compute the later quarters. You need EXcel 97 or later to rund the program, however, you can download and then copy the unzipped file to a floppy disk and run it on any computer that has Excel97. I hope this helped you. ed

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Author: mneakrase Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65061 of 121351
Subject: Re: Need help! Date: 4/16/2003 11:46 AM
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I think you may have a different problem that you don't realize. While you got an extension on filing your taxes, it doesn't include an extension on paying your taxes so you're starting to accrue at least interest at the moment, if not penalties.

Yeah, I'm aware that I'm accruing interest, but that is not to be helped, without the retirement thing I owe approximately $1,009.00.

I had another question about the retirement thing though, I can deduct contributions made before April 15th to a work plan. Is this correct?

Thanks everyone!
Megan

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65062 of 121351
Subject: Re: Need help! Date: 4/16/2003 12:15 PM
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No, if by a 'work plan' you mean a 401K. 401K contributions are not included in the taxable income on your W-2 and therefore can not be deducted again.

Debra

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Author: sheldick One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65066 of 121351
Subject: Re: Need help! Date: 4/16/2003 1:34 PM
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if u cn come up with the cash, i believe u can send them a payment without the return - even if u find ways to reduce it later. at least that will stop the penalties on the date of thier receipt, and if u overpaid, then u can ask for a refund of the difference.

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Author: 4Sale One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65067 of 121351
Subject: Re: Need help! Date: 4/16/2003 5:13 PM
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No, if by a 'work plan' you mean a 401K. 401K contributions are not included in the taxable income on your W-2 and therefore can not be deducted again.

Actually it sounds as if they under the threshold allowing them to file form 8880 (<$50,000 married/jointly) but are in the phase out range. Line 2 of 8880 allows you to deduct a portion of "Elective deferrals to a 401(k) or other qualified employer plan, voluntary employee contributions, and 501(c)(18) plan contributions for 2002." These are entered on Line 49 of your 1040 - after you complete the form.

If you're trying to scrape together a few more deductions look in this area of your 1040 and make sure and review any itemized deductions, though with your salary and no mortgage the standard is probably the best.

-4Sale
Not a tax expert, just like numbers.

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Author: 4Sale One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65068 of 121351
Subject: Re: Need help! Date: 4/16/2003 5:17 PM
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Oops, realized that wasn't really the poster's question...

I had another question about the retirement thing though, I can deduct contributions made before April 15th to a work plan. Is this correct?

Typically, I believe the work designates all contributions to specific years. While I have no idea if they can designate pre-tax day contributions to the previous year, I haven't seen it before. The pre-tax day rule is typically applied to IRAs where you can more directly control the contribution.

Sorry.

-4Sale

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Author: reallyalldone Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65070 of 121351
Subject: Re: Need help! Date: 4/16/2003 8:50 PM
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Yeah, I'm aware that I'm accruing interest, but that is not to be helped, without the retirement thing I owe approximately $1,009.00.

One of my tenets of personal finance is never screw with the IRS. I think you are better off filing and working out a payment plan than what you're doing. Heaven knows I could be wrong(so maybe one of the more knowledgeable tax people could speak to this.

rad


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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 65074 of 121351
Subject: Re: Need help! Date: 4/16/2003 11:29 PM
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You can for a small fee setup a payment plan with the IRS. Frequently, it is better to pay the state and make payment to the IRS.

W-4s determine withholding (not W-2s).


Debra

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