LH2004 said:I'm not at all convinced the management fee is an investment expense. I think it's most likely a kind of additional rent and therefore nondeductible (unless the rent is deductible because it's for a business, etc.), because it's really for the escrow services of standing ready to turn your money over to the landlord -- i.e., as a condition of your lease, your landlord requires you to pay a kickback to his bank. I can see another argument that it's really a reduction in interest, in which case it fully offsets the income. But they're not really providing any investment management services, so I don't see how you can characterize it that way.
I thought I was anal.

Schedule C or just Form 1040, Line 21, "Other income?"

I did an AOR in 2007, in which I received several business cards. In applying for them, I declared my business to be a sole proprietorship with 0 years in business and $0 income.

Since biz credit is reported, and since I want to develop some kind of track record with respect to the sole proprietorship, I want to file a Schedule C and declare any AOR-related income (interest earned, bank bonuses, card bonuses thru CardSelection.com, etc.). Except for my full-time job, I have no other income except thru the AOR.

Is there any problem with filing a Schedule C for this income, or does it have to be on Form 1040 under "other income?"

Is there a link to freefile? I have it linked in the Financial Toolkit thread, but it probably belongs here. Thanks.

SecondCor521 said:frootmall,

Thanks for the reply.

On the first issue, the husband could easily produce a canceled check and a copy of the divorce decree mandating the alimony payment. The husband is trying to debate whether or not he should remind his ex-wife to report it on her return or not. He's leaning towards not.

On the second issue, I misspoke. Where I wrote "original 2006 federal return" I meant to say "original 2006 state return". The TP originally paid the balance owing with the original 2006 state return and then ended up getting a state tax refund when he amended his returns.

Since the TP paid his 2006 state taxes in both 2006 (through withholding and estimated tax payments made during 2006) and in 2007 (through the payment made with the original state state plus any estimated payments for 2006 that were made in 2007), it gets a little more complicated.

The refund is considered to partially a refund of the taxes paid in 2006 and partially of the taxes paid in 2007. For example, let's say that the TP had $3000 withheld from his salary in 2006 and then paid $1000 when he filed his state tax return on April 15, 2007. His total tax paid for 2006 was $4000. 75% of the tax was paid during 2006 and 25% of the tax was paid during 2007. So when he filed his amended return and got a refund, 75% of the refund is considered a refund of taxes paid during 2006 and 25% of the refund is considered a refund of taxes paid during 2007.

To continue the example, let's say that he got a $400 refund. $300 of the refund is considered to be from taxes paid during 2006 and $100 is considered to be taxes paid during 2007. So the most he would have to include on line 10 of the 2007 Form 1040 as a taxable refund of previous year's taxes would be $300.

What can he deduct on Schedule A? Since he made a $1000 payment in 2007, he would ordinarily be able to deduct the $1000. But $100 of the refund is considered to be a refund of the payment he made in 2007. Since he received a refund in the same year as he paid the taxes, he should reduce his 2007 deduction by $100. In other words, he can only claim a $900 deduction for the $1000 payment made on April 15, 2007.

Since the amount that he shows as income on line 10 of his 2007 Form 1040 won't match the amount on the 1099-G, he should attach a statement to his Form 1040 showing his calculations and write "See attachment" on the line next to line 10.

See page 21 of Publciation 525.
Read the sections called "Recovery and expense in same year" and "Recovery for 2 or more years" (including the example) that begin near the bottom of the left column.

bogalusa said:Schedule C or just Form 1040, Line 21, "Other income?"

I did an AOR in 2007, in which I received several business cards. In applying for them, I declared my business to be a sole proprietorship with 0 years in business and $0 income.

Since biz credit is reported, and since I want to develop some kind of track record with respect to the sole proprietorship, I want to file a Schedule C and declare any AOR-related income (interest earned, bank bonuses, card bonuses thru CardSelection.com, etc.). Except for my full-time job, I have no other income except thru the AOR.

Is there any problem with filing a Schedule C for this income, or does it have to be on Form 1040 under "other income?"
Just because you talked some bank into issuing you a credit card that they call a business card does not make your investment activities a business.

Would you really want to pay Self-Employment taxes on your interest earned?

All of your interest payments belong on Schedule B. You will receive copies of Form 1099-INT from the banks.

All you are doing is borrowing money from banks and investing it. That is not a business.

frootmall said:bogalusa said:Schedule C or just Form 1040, Line 21, "Other income?"

I did an AOR in 2007, in which I received several business cards. In applying for them, I declared my business to be a sole proprietorship with 0 years in business and $0 income.

Since biz credit is reported, and since I want to develop some kind of track record with respect to the sole proprietorship, I want to file a Schedule C and declare any AOR-related income (interest earned, bank bonuses, card bonuses thru CardSelection.com, etc.). Except for my full-time job, I have no other income except thru the AOR.

Is there any problem with filing a Schedule C for this income, or does it have to be on Form 1040 under "other income?"
Just because you talked some bank into issuing you a credit card that they call a business card does not make your investment activities a business.

Would you really want to pay Self-Employment taxes on your interest earned?

All of your interest payments belong on Schedule B. You will receive copies of Form 1099-INT from the banks.

All you are doing is borrowing money from banks and investing it. That is not a business.I tend to agree with this statement. For myself, the interest earned is solely for personal use (ie not reinvested in my "business" (1.5k in eBay sales in 2006) in any way). This seems the most direct way to keep the paper trail straight. I have no desire to complicate things, nor pay addittional taxes (such as double social security), and would like to keep all my income on my personal side (as it is personal anyway), becuase I have tuition and student loan deductions I can take advantage of.

Furthermore, there is no way I'm planning on attempting to deduct any "business expenses" (such as the $1,500 or so of BT transfer fees from the 80 cards I'm managing) from any of my income. Doing such would require Schedule C, and would only raise more flags for an audit, for a very small reward given the low tax bracket I'm in anyway as a student.

Critiques?

I heard someone say that PMI is tax deducable for 2007, I did some research online and found that the closing has to be done in 2007. I bought my Condo in 2006, so I guess PMI is not deducable for me? I hate PMI, still trying to get myself out of PMI.

xaznxeclipsex said:I heard someone say that PMI is tax deducable for 2007, I did some research online and found that the closing has to be done in 2007. I bought my Condo in 2006, so I guess PMI is not deducable for me? I hate PMI, still trying to get myself out of PMI.

Yes, only deductible if you closed in 2007. There is also an income limit of 110K for this deduction to apply.

My wife and I are LLC members, with no other members. Although we file taxes jointly, the way LLC income is split is important: hers is passive (no Social Security or Medicare tax), while mine is active (maximum amount of income tax-deductible SEP-IRA contributions are based on it).

Last year we "split" income and ownership as 57%/43%. Can I change this allocation this year, or does it require some justification and paper work?

thanks, that's what I thought but was hoping not LOL. Where are all the FAR Turbo Tax deals this year?!