2022 (for 2021) Income Tax Thread

[Paper_jam 838]

I hope it's OK to start a thread on this; I ran a search and found threads for prior tax years, but not for TY 2021.

To start things off, I'll ask about something that happened to my TY 2020 return, which may affect my filing for TY 2021. This is a 1041 return for a family trust. For TY 2020, when preparing the 1041 I calculated that I had overpaid by (approximately) $2000. Instead of requesting a refund, I selected the choice to have that overpayment credited to my future 2021 return.

A few months after filing the 2020 return, I received a terse notice from IRS stating that I owed an additional $700 (roughly), which I paid promptly by check. The notice did not indicate how the IRS arrived at the additional amount due, or what it meant for the amount that I had previously requested be applied to my 2021 taxes. So now I'm uncertain if I can still claim that full $2000 amount as a credit towards my 2021 taxes, as intended, or if some or all of it was actually "consumed" by the IRS towards my 2020 tax liability, which was apparently more than I had calculated.

When a taxpayer indicates the choice for an overpayment to be credited to next year's return, does IRS "lock it in" for only that purpose, or can IRS apply some or all of that "overpayment" amount to the current-year tax due, if additional tax liability is discovered? Thanks for any feedback.

[Parliament 14,334]

How do I deduct the living expenses of my sugar baby?

[DalTxHornFan 3,118]

30 minutes ago, Parliament said:

How do I deduct the living expenses of my sugar baby?

Capitalize those costs and then amortize them over the expected future life of that asset.

[Kennythetiger 9,479]

On 3/23/2022 at 4:02 PM, Paper_jam said:

I hope it's OK to start a thread on this; I ran a search and found threads for prior tax years, but not for TY 2021.

To start things off, I'll ask about something that happened to my TY 2020 return, which may affect my filing for TY 2021. This is a 1041 return for a family trust. For TY 2020, when preparing the 1041 I calculated that I had overpaid by (approximately) $2000. Instead of requesting a refund, I selected the choice to have that overpayment credited to my future 2021 return.

A few months after filing the 2020 return, I received a terse notice from IRS stating that I owed an additional $700 (roughly), which I paid promptly by check. The notice did not indicate how the IRS arrived at the additional amount due, or what it meant for the amount that I had previously requested be applied to my 2021 taxes. So now I'm uncertain if I can still claim that full $2000 amount as a credit towards my 2021 taxes, as intended, or if some or all of it was actually "consumed" by the IRS towards my 2020 tax liability, which was apparently more than I had calculated.

When a taxpayer indicates the choice for an overpayment to be credited to next year's return, does IRS "lock it in" for only that purpose, or can IRS apply some or all of that "overpayment" amount to the current-year tax due, if additional tax liability is discovered? Thanks for any feedback.

Did you save the first notice?  I have never had someone receive a notice with an amount due, without an explanation of how the IRS arrived at that conclusion. These first notices are usually about three pages long. They’ll also have an accounting of “taxes you paid” vs “taxes you owe”, which would answer your question much briefer than I did [not] do. 

[CHIEF 5,095]

I have a SEP question. Do contributions have to be made by April 15th, if you have to file an extension? Or can they be made anytime up to the October deadline? We are waiting on a K-1 from our CPA, on an LLC, for which I am an officer. The K-1 will not be completed until after April 15th.

Thanks,

CHIEF

[Parliament 14,334]

On 3/23/2022 at 4:25 PM, Parliament said:

How do I deduct the living expenses of my sugar baby?

UPDATE

Turns out you can deduct your "live-in nanny or household employee."  Good to know.

Also.  I've had capital losses (options and shorts) in my brokerage accounts the past 2 years.  Looks like Turbo Tax has let me deduct only $3000 each year, and is passing the rest of those losses on the the next year.  Is that correct? 

[Native Horn 3,516]

41 minutes ago, Parliament said:

UPDATE

Turns out you can deduct your "live-in nanny or household employee."  Good to know.

Also.  I've had capital losses (options and shorts) in my brokerage accounts the past 2 years.  Looks like Turbo Tax has let me deduct only $3000 each year, and is passing the rest of those losses on the the next year.  Is that correct? 

That is my understanding.  When I do cash out my options, I will have a fairly significant loss, and when researching, the $3K per year deduction is also what I saw.

[Parliament 14,334]

Guess I should stop shorting TSLA.

[Horns99 166]

Is there a dollar limit on back door Roth Conversions? Is it the 6K or I can I convert more? It’s from traditional non deductible IRA .


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[CooterBrown 18,032]

Is there a dollar limit on back door Roth Conversions? Is it the 6K or I can I convert more? It’s from traditional non deductible IRA .


Sent from my iPhone using Tapatalk

Convert what you want but you’ll pay taxes on any capital gains in that IRA.

[Horns99 166]

Convert what you want but you’ll pay taxes on any capital gains in that IRA.

It’s was a non deductible IRA , it’s been in a money mkt the entire time, so hardly any capital gains in the account. Had Fidelity do a conversion on it ( so w/d & invested it in my Roth ) Turbo Tax keeps telling me I made a excess Roth Contribution & will owe a penalty on it. Earlier in the year I converted 6k & then in December I converted the remaining balance. What am I missing ?


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[CooterBrown 18,032]

8 hours ago, Horns99 said:

It’s was a non deductible IRA , it’s been in a money mkt the entire time, so hardly any capital gains in the account. Had Fidelity do a conversion on it ( so w/d & invested it in my Roth ) Turbo Tax keeps telling me I made a excess Roth Contribution & will owe a penalty on it. Earlier in the year I converted 6k & then in December I converted the remaining balance. What am I missing ?


Sent from my iPhone using Tapatalk

Since I only do 6K a year since I am just contributing to an IRA in order to do the backdoor conversion so I've never ran into any issues.  Maybe Fidelity is flagging it just because the dollar amount exceeds 6K and once you enter the details on the tax form, it's all good?

 

Maybe someone else with experience converting an normal IRA will chime in. 

 

[Guest Lobo]

On 3/30/2022 at 12:12 PM, CHIEF said:

I have a SEP question. Do contributions have to be made by April 15th, if you have to file an extension? Or can they be made anytime up to the October deadline? We are waiting on a K-1 from our CPA, on an LLC, for which I am an officer. The K-1 will not be completed until after April 15th.

Thanks,

CHIEF

File the extension, and you should be fine (I AM NOT A CPA).  I've got a great CPA/tax attorney here in Austin that helped me with this years ago.  If the K-1 delay is material to how much/when you can make your SEP contribution (plus potential match)...then you have that right.  Make sure the issuing LLC/LLP knows that and is on the same page with their IRS messaging, if that makes sense.  

[dingleberryswitzer 2,724]

Well I’m officially mad at the IRS. For years I had set up my withholding amount to be in line with our deductions and credits (kids and shit).  But then we got those advance child tax credits over the summer.  So I had to pay IRS like $4500 yesterday, meanwhile we got 4800 over the summer.  So under normal circumstances (which I had planned for!) we’d be getting a modest $300 refund.  EXCEPT because I withhold so little and owed $4500 they slapped me with an underpayment penalty.  WTF?  

[El Tri 412]

35 minutes ago, dingleberryswitzer said:

Well I’m officially mad at the IRS. For years I had set up my withholding amount to be in line with our deductions and credits (kids and shit).  But then we got those advance child tax credits over the summer.  So I had to pay IRS like $4500 yesterday, meanwhile we got 4800 over the summer.  So under normal circumstances (which I had planned for!) we’d be getting a modest $300 refund.  EXCEPT because I withhold so little and owed $4500 they slapped me with an underpayment penalty.  WTF?  

that was your bad for not opting out of the child tax credit

[dingleberryswitzer 2,724]

I wasn’t aware I had the choice.  They just put the money in my bank and I left it there knowing if have to pay it back .  The penalty was only like $16.  

[El Tri 412]

10 minutes ago, dingleberryswitzer said:

I wasn’t aware I had the choice.  They just put the money in my bank and I left it there knowing if have to pay it back .  The penalty was only like $16.  

so you're just paying them back with their own money then. you're upset over $16?

 

[luke duke 6,414]

Capitalize those costs and then amortize them over the expected future life of that asset.

You can’t capitalize something with an expected useful life of less than one year.

[dingleberryswitzer 2,724]

52 minutes ago, El Tri said:

so you're just paying them back with their own money then. you're upset over $16?

 

That’s like a 12 pack of beer man.  What can I say, I’m petty.  
now that I think about it, I’m not even certain I was actually penalized or if HRBlock (whose service I used) was just running the numbers and predicted I will be penalized.  

[Redneck Mutha 8,017]

3 hours ago, luke duke said:

You can’t capitalize something with an expected useful life of less than one year.

Well not with that attitude. 

[Guest Lobo]

You wanna make $16 the hard way?  

[HRSchenker 2,274]

On 4/11/2022 at 10:53 PM, CooterBrown said:

Convert what you want but you’ll pay taxes on any capital gains in that IRA.

Backdoor conversions are tax free as long as the contributions are non deductible per my CPA 

[1978horn 896]

My 15 yr old son started working this last year and made ~5k at a fast food restaurant. Trying to figure out if he needs to file, but I have seen two different answers out on the internets…

1. Yes, if he makes over $1,100
2. No, if he doesn’t make $12,500


Anyone know the answer?

[tfoolry 8,239]

I owe $1,300 federal taxes for 2021 as my employer didn’t withhold enough since I increased my 401(k) contribution.   I’ve already increased my employer withholding for this year but turbo tax says I need to make quarterly payments to IRS starting tomorrow.  Will I get penalized if I don’t make those even though employer is now withholding more to cover this years estimated taxes?

[WithoutAClue 15,455]

1 hour ago, 1978horn said:

My 15 yr old son started working this last year and made ~5k at a fast food restaurant. Trying to figure out if he needs to file, but I have seen two different answers out on the internets…

1. Yes, if he makes over $1,100
2. No, if he doesn’t make $12,500


Anyone know the answer?

if they withheld taxes from his paycheck he will need to file to get that money back.

unless, of course,  he is independently wealthy and doesn't mind giving the government extra money.

[1978horn 896]

if they withheld taxes from his paycheck he will need to file to get that money back.
unless, of course,  he is independently wealthy and doesn't mind giving the government extra money.

They withheld ~$20 in federal taxes. It might be good for him to file anyway, just to start getting him used to it.

[Incredulity 11,683]

12 hours ago, tfoolry said:

I owe $1,300 federal taxes for 2021 as my employer didn’t withhold enough since I increased my 401(k) contribution.   I’ve already increased my employer withholding for this year but turbo tax says I need to make quarterly payments to IRS starting tomorrow.  Will I get penalized if I don’t make those even though employer is now withholding more to cover this years estimated taxes?

AFAIK...NOT CPA...blah, blah, blah.

If you pay 100% of next years taxes or 110% of the previous years taxes through withholdings there won't be a penalty.  So if you have a dynamic income situation(ownership in S-corp, surprise dividends from a C or...? you should pay estimates.  If you are strictly W2 and don't for-see additional income and are confident you have your withholding straight there isn't really a need.

 

[NeverMarryAStripper 21,943]

13 hours ago, 1978horn said:

My 15 yr old son started working this last year and made ~5k at a fast food restaurant. Trying to figure out if he needs to file, but I have seen two different answers out on the internets…

1. Yes, if he makes over $1,100
2. No, if he doesn’t make $12,500


Anyone know the answer?

Go to the IRS.gov, but at that income level he should probably file just to get all of his federal withholding back.

Edited April 15, 2022 by NeverMarryAStripper

[Celery Man 21,003]

I was relocated by a new employer in 2020 (at the end of the year). They had warned me that it would be a whole tax thing - I guess the cost of relocation counts as income, but there's no withholding. That finally hit, which was nice.

[tfoolry 8,239]

1 hour ago, Incredulity said:

AFAIK...NOT CPA...blah, blah, blah.

If you pay 100% of next years taxes or 110% of the previous years taxes through withholdings there won't be a penalty.  So if you have a dynamic income situation(ownership in S-corp, surprise dividends from a C or...? you should pay estimates.  If you are strictly W2 and don't for-see additional income and are confident you have your withholding straight there isn't really a need.

 

I’m just W2 with no significant other income from LLC/S corps, real estate or other large investments so I’m minority here on Surly.  
Sounds like I’m good   Thanks

 

[Sbbruin 21,898]

Weird.  I wrote the IRS a check, but it was deducted from my account as an ACH payment.  Didn't know you/they could do that.

[Sbbruin 21,898]

13 hours ago, 1978horn said:

My 15 yr old son started working this last year and made ~5k at a fast food restaurant. Trying to figure out if he needs to file, but I have seen two different answers out on the internets…

1. Yes, if he makes over $1,100
2. No, if he doesn’t make $12,500


Anyone know the answer?

My 18 yo made like $3,500 and filed.  He can use the free turbo tax platform to do it.  The boy is getting $45 back.  

[hornbri 1,417]

I am impressed with the IRS speed, they were able to deduct the money from my checking account less then 24 hours after filing. 

I am sure those fuckers would takes months if I was due a refund. 

[Vegas64 678]

3 hours ago, Celery Man said:

I was relocated by a new employer in 2020 (at the end of the year). They had warned me that it would be a whole tax thing - I guess the cost of relocation counts as income, but there's no withholding. That finally hit, which was nice.

Yep. Have done that and it hurts.

I had a baby in 2020. The IRS still doesn't recognize the SSN for the child tax credit which has stopped me from being able to submit taxes online as it gets rejected. Second year in a row I have to print and mail.

How long does it take the IRS and SSN database to ELT or batch integrate? Yikes.

[Shaggy3.0 1,695]

3 hours ago, Vegas64 said:

How long does it take the IRS and SSN database to ELT or batch integrate? Yikes.

I'm sure there's a low-bid inexperienced outsourced team in the middle of that process.  So the answer is "never".

[CooterBrown 18,032]

I owe $1,300 federal taxes for 2021 as my employer didn’t withhold enough since I increased my 401(k) contribution.   I’ve already increased my employer withholding for this year but turbo tax says I need to make quarterly payments to IRS starting tomorrow.  Will I get penalized if I don’t make those even though employer is now withholding more to cover this years estimated taxes?

I owe $6-7K extra every year since we don’t deduct enough out of our paychecks. I also have never made quarterly tax payments even though I’m supposed to. The penalty for not making those payments this year was $63.

[tfoolry 8,239]

I’ve always promptly paid over $1k for years. Apparently things changed in 2020. Whatever.  The IRS website says penalty starts at 0.5%/month & ramps up to like 25%.  BOHICA. 

[NeverMarryAStripper 21,943]

That looks like the penalty for not paying the amount owed on the due date of the return not the underpayment penalty.

[Brew 3,049]

On 4/11/2022 at 10:38 PM, Horns99 said:

Is there a dollar limit on back door Roth Conversions? Is it the 6K or I can I convert more? It’s from traditional non deductible IRA .


Sent from my iPhone using Tapatalk

You can only make up to $6k a year non deductible contributions. You can convert whatever you have in nondeductibles whenever you want tax free as long as there isn’t an IRA out there that has deductible contributions in it. Lots of people make two years non deductible by 4/15 then roll both at the same time.

[Brew 3,049]

On 4/14/2022 at 9:07 PM, 1978horn said:

My 15 yr old son started working this last year and made ~5k at a fast food restaurant. Trying to figure out if he needs to file, but I have seen two different answers out on the internets…

1. Yes, if he makes over $1,100
2. No, if he doesn’t make $12,500


Anyone know the answer?

$1100 is related to unearned income, earned is $12,500 cutoff.

[Brew 3,049]

11 hours ago, Celery Man said:

I was relocated by a new employer in 2020 (at the end of the year). They had warned me that it would be a whole tax thing - I guess the cost of relocation counts as income, but there's no withholding. That finally hit, which was nice.

Is your new employer legit and know what they are doing, parts of the move should have been nontaxable if handled correctly.

[Brew 3,049]

10 hours ago, Sbbruin said:

Weird.  I wrote the IRS a check, but it was deducted from my account as an ACH payment.  Didn't know you/they could do that.

They can’t that I know of from a check, the efile had to be set up to draft which means you are probably going to double up.

[Sbbruin 21,898]

58 minutes ago, Brew said:

They can’t that I know of from a check, the efile had to be set up to draft which means you are probably going to double up.

No, I sent in an extension estimate.  No efile.  They didn’t have any bank info other than the check

[Celery Man 21,003]

9 hours ago, Brew said:

Is your new employer legit and know what they are doing, parts of the move should have been nontaxable if handled correctly.

I suspect they are - not an enormous company but ~7k global employees. If I’m remembering right it was the temporary housing that was going to create the big tax thing.

[Brew 3,049]

Temporary housing would as it’s no different than a relocation bonus. Most of the actual moving expense would not be included.

[Parliament 14,334]

So it looks like I goofed up.  I sold some stock held in a regular account (non-retirement) and incurred a modarate, non-Sur;y 1% capital gain. Small enough that I forgot to add it to my 1099.  My return was accepted on April 8, and my refund says it will come on April 29.  I gotta refile, and it looks like I need to wait for my refund.  

 

Do I have this right?  Wait for my refund then redo my return?  Am I gonna hafta pay a penalty?  Am I going to prison?

[Kennythetiger 9,479]

[CooterBrown 18,032]

So it looks like I goofed up.  I sold some stock held in a regular account (non-retirement) and incurred a modarate, non-Sur;y 1% capital gain. Small enough that I forgot to add it to my 1099.  My return was accepted on April 8, and my refund says it will come on April 29.  I gotta refile, and it looks like I need to wait for my refund.  
 
Do I have this right?  Wait for my refund then redo my return?  Am I gonna hafta pay a penalty?  Am I going to prison?

I’ve done an amendment before. I had owed already so I had to include another check for the difference. It was maybe an extra $200. There was no penalty as long as that form is submitted within like a year.

I’ve also completely not bothered when I forgot to include a sale that had minimal gains. Unless you truly have a unique return with a lot of uncommon stuff on it, the chance of getting audited is basically zero.

[Parliament 14,334]

Yeah it's a bit more than "minimum."   Big enough to be immoral, actually.  I'll do the amendment.  

Edited April 16, 2022 by Parliament

[Anastasis 23,491]

Well the witches at TurboTax tell me I am in for a refund.  I have no idea if that is true or not, but clicking submit.