Basic Income Tax Questions and Answers

 

If I received a State tax refund last year, I have to consider it "Income" on this year's Federal return?

If you took the standard deduction in 2010, the refund will not be taxable on your 2011 return. If you itemized deductions in 2010 (schedule A) and took the income tax deduction, then some or all of the refund may be taxable. You might have gotten a 1099-G form from your State if you used the deduction.

I was paid “in cash” for doing hair, what do I do?

If this is business income you don't need a Form 1099. Self-employment income should be based on your records.

I don’t have a w-2 because I'm retired, what should I do?

You do not enter any information in the W-2 section if you are retired and only receive retirement income. Your retirement income will be on a 1099-R.

What if I have not received a 1099-G Form? Can I just enter the amount that I received on my state tax return?

You don't need to have a 1099-G as long as you know how much your refund was last year.

What if i am not receiving 1099s for interest earned? Should I just take the amount from my bank statements?

Payers of interest are not required to issue a 1099-INT if the interest is below a certain amount. You can just take the amount from your year-end statement and enter it as if it were reported on a 1099-INT.

What is paid family leave?

Paid family leave refers to leaves taken from work for the purpose of recovering from a serious illness, to care for a seriously ill family member or to bond with a newly born or newly adopted child, during which the leave-taker receives some level of financial support from the employer, an insurance policy, or a government program. Other names for paid family leave include "Family Disability Leave", "Family Leave Insurance" and "Paid Parental Leave".

What if I have a form SSA-1099?

Up to 85% of Social Security becomes taxable when your income, including 1/2 your social security, reaches:

  • Married Filing Jointly: $32,000
  • Single or head of household: $25,000
  • Married Filing Separately: 0

If you ONLY get SSI or Social Security or Social Security Disability or a SSA-1099 you do not have to file a return.

My dependent son gets Social security from his deceased father. Is that income for me?

Social Security income received by your dependent child is not reportable income, either to the child or to you.

Do your winnings offset your losses at a casino?

Well I would put it the other way around - your losses can sometimes offset your winnings. You have to report your winnings as income no matter what, without subtracting losses. To deduct your losses you have to itemize deductions. Then you can deduct your losses, but only up to the amount of your winnings.

If you take the standard deduction you cannot specifically deduct gambling losses. But normally you take the standard deduction because it is higher than your itemized deductions. So you are actually getting a bigger deduction than if you just deducted your losses, and it's not limited to the amount of your winnings.

Don't have a w-2 from a job, what do I do?

If a form was issued and they sent it to the IRS - yes, you need to get a copy of that form. One thing you can do is try to create a substitute W-2 form from the last pay stub and submit it with that. Or you can call the IRS and request they send you a transcript of the W-2 and enter the information in from there. If the IRS has the information and you don't have it on your return, the IRS will more than likely send you and your wife a letter asking for the back taxes with interest on the unreported income.

I have dividends reported on 1099-Div but they are reinvested I did not receive any cash. What do I need to do?

It does not matter that they are reinvested. They were used for your benefit - reinvestment, and are taxable income. You don't have to actually get cash in hand for the income to be taxable.

That being said, since you are paying tax on the dividends, you don't want to be taxed again when you sell the shares that were bought with the reinvestment, so you have to keep careful records of each dividend reinvestment so that you can accurately calculate your cost basis in the shares when you sell them.

What if you did not receive a 1099G. I got a refund from the state last year - should I just take the amount from my last year's return?

Your refund is taxable only if you itemized your personal deductions last year. If you used the SDM, the refund does not need to be reported. If you determine that the refund does need to be reported, then take the number from your tax return copy since you did not receive a 1099G. SDM means Standard Deduction Method. Now, if you itemized and got a refund back from the state, the refund may be fully taxable or partially taxable. To determine how much is taxable, subtract the SDM allowance from the amount that is itemized. If the difference is greater than your state refund, then it is fully taxable. If the difference is less than the state refund, then use the difference as your taxable state refund amount and list it as your entry for state tax refund for 2009. The Standard Deduction Amount for 2008 is: Single $5450, Married filing jointly $10900, Married filing separately $5450, and head of household is $8000.

I was paid cash to babysit my sister's daughter, how do I claim this money?

You need to report all your income even if you don't get a 1099Misc. You use your own records. You use your own name and ssn. You should say you use the Cash Accounting Method and all income is at risk. After you put in your income and expenses if your net profit is $400 or more you will pay 15.3% (13.3% for 2011) Self Employment tax in addition to your regular income tax.

Here are the IRS instructions for Schedule C, the business codes start on page 9 http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

Also here is IRS information on Self Employment - http://www.irs.gov/businesses/small/article/0,,id=115045,00.html

I put money into my employee stock purchase plan, do I need to do anything with my taxes for this?

If you purchased the stock and then sold it, it needs to be entered. If you only purchased the stock without selling it, or have not yet done the purchase, then it does not affect your return.

I have not received a 1099-g but I know I received a state refund last year. What should I do?

You can try to contact your state's tax department again and see if they have already issued your form 1099-G or have them reissue you another one.

If you choose not to wait, you can file it with the amount that you received last year, and you may have to amend your tax returns once you get the correct information regarding the state tax refund and it is different from what you claimed on your 2011 return.

If you file your tax return without it, then you will have to amend your return once you receive the form 1099-G from the state and report the income.