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Written by Mike
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Adjusted gross income (AGI) is simply your taxable income before subtracting out your exemption and your standard deduction (or itemized deductions, if you itemize). Alternatively, your adjusted gross income is the sum of all of your different types of taxable income, after subtracting several deductions: - Educator expenses,
- Health Savings Account (HSA) deductions,
- Moving expenses,
- One half of your self-employment tax,
- Self-employed health insurance deductions,
- SEP, SIMPLE, or qualified plan contributions,
- Alimony,
- Traditional IRA contributions,
- Deductible student loan interest,
- Tuition and fees deduction, and
- The domestic production activities deduction.
Your adjusted gross income can be found at the bottom of the front page of your Form 1040. (Line 37.) Want to learn more about taxes? Take a look at my book, Taxes Made Simple: Income Taxes Explained in 100 Pages or Less. |
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Written by Mike
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A reader asks: In the middle of this year I reorganized my sole proprietorship into an LLC. My question: Is there some formality I must show the IRS? Also, should I use the LLC name or the original business name for most purposes? My answer: Given that an LLC is a disregarded entity for Federal tax purposes, there isn't much of a change really. If you formed it in the middle of 2009, the only difference is that you'll have 2 Schedule C's for the year--one for the period during which the business was operated under your name (and SSN), and one for the period during which the business was operated as an LLC (with a new Federal Employer Identification Number).
As to what business name to use in general: I'm not a lawyer, so it would be a good idea to get this verified, but I believe there could be potentially be unlimited liability issues if you don't operate under the LLC's name. That is, if you continue doing business as yourself (or under the name of a "doing business as"), the LLC might not protect you from any lawsuits. Want to learn more about the entity-selection decision? Take a look at my related book: Surprisingly Simple: LLC vs. S-Corp vs. C-Corp Explained in 100 Pages or Less. |
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Written by Mike
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A reader asks: My business is a sole proprietorship. When I pay myself an income from the business, how is it taxed and how do I report it? Does it count as salary? Is it a loan? Any help you can offer would be greatly appreciated!
My answer: If we're talking about Federal income taxes, it's neither salary nor a loan. In fact, it isn't anything.
As far as the IRS is concerned, for a sole proprietor, there is no distinction between the business and the person running it. As such, moving money from the business' checking account to your own checking account will have no tax effect whatsoever. It would be analogous to you moving money from one personal checking account to another personal checking account. Quick note: They are going to tax you on the money that goes into the business (ie, the profits). As a sole proprietor, the business' net profit will show up on your own personal Form 1040 (on Line 12). This will be included in your taxable income, and you'll therefore be paying taxes on it. But again, for sole proprietors, Federal tax law doesn't distinguish between your personal checking accounts and those of the business. As a result, moving money from one to the other will have no tax effect. About the Author: Mike Piper is the author of Surprisingly Simple: Independent Contractor, Sole Proprietor, and LLC Taxes Explained in 100 Pages or Less. |
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Written by Mike
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A reader asks: I am self employed, and last year my income was a lot smaller than past years. I paid estimated taxes during the year, however, TurboTax is telling me that I'm getting a refund greater than what I paid in taxes. Could that be right? My answer: Yes, if you claimed any refundable credits, it is possible to have a tax refund that's greater than the amount of taxes you paid. Most credits credits are known as non-refundable credits, and they cannot reduce your tax liability below zero. Refundable credits on the other hand can reduce your tax liability below zero. Some of the more common refundable credits include: However, given that most credits are non-refundable, having a refund greater than your tax payments is certainly a good reason to want to check everything over just to be sure. Want to learn more about taxes? Take a look at my recent book, Taxes Made Simple: Income Taxes Explained in 100 Pages or Less. |
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Written by Mike
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A reader asks: How do I know if I filed my tax return for 1999? And, if I haven't filed, how do I go about doing that now? My answer: Easy: contact the IRS and ask them. This page has information on how to request records of previous filings.
As to how to file late, it's much the same process as filing on time. (This page has copies of tax forms from prior years.) I'd suggest getting it done sooner rather than later, by the way. If you owe money for tax year 1999, interest and penalties are still accumulating. The longer you wait, the harder it's going to be.
Want to learn more about taxes? Take a look at my recent book, Taxes Made Simple: Income Taxes Explained in 100 Pages or Less. |
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Written by Mike
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A reader asks: My Father is in his 70s and suffers from Alzheimer's. He's been living with me for the last couple years. I know that he put money into an IRA for much of his life. However, we can't seem to find any records of this account. Can you suggest how I can locate it to see if he still has funds available? My answer: That's a tough situation. My first suggestion would be to check the Missing Money database. It's essentially a database run by a group of state and local governments that has record as to unclaimed property. I don't know if they'd have information about unclaimed IRAs, but it's worth a shot. If that doesn't work, it looks like you're going to be stuck trying to hunt it down manually.
Does he have any other statements from other financial institutions? If so, I'd try contacting them to see if they have any information as to him ever having an IRA with them.
Alternatively, do you have any of his old tax returns? If you do, are there any 1099-DIV or 1099-INT forms included? If there are, I would contact the financial institutions listed there as well.
The last thing I can think of: To the best of your knowledge, was he ever audited by the IRS or a state tax agency? If he was, they might have copies of the proof he submitted of having made contributions to a retirement plan.
I wish you the best of luck with your search. Want to learn more about taxes? Take a look at my recent book, Taxes Made Simple: Income Taxes Explained in 100 Pages or Less. |
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