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Tax Season: Calling All CPA's and Guru's

DeacFromThe919

DeacFromThe919

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Alright, tax season is about to gear up and I thought it might be nice to have a thread for questions/comments/advice/concerns???

Anyway I already have a situation I'm looking for advice on so hear goes:

The wife and I just got married in October of 2011. In the beginning of 2011 we were still in Pharmacy school and graduation happened in May. We then moved to Asheville where we both started our 1st real jobs in July. She is completing a 2 year dual pharmacy residency/masters degree program, so she it technically still considered a full time student. She is also employed at the hospital and last year her earnings were around just under $19,000. As for me I work in retail pharmacy up here and last year my total earnings were just under $49,000. We have not kids, are currently renting a house, and aside from the wedding/honeymoon haven't made any bid purchases. We both have a lot of college debt, hers is still deferred but mine (around 100k) has been in repayment since december 2011 (that's when I made the first payment).

So after all that background info I guess the question is do we file jointly or would it be more beneficial to file separate? If we file separate can we file single and separate since we were not married until October of 2011 or do we still have to file "married but filing separate"? I know that the married but filling separate status is good sometimes but it also causes you to loose a lot of deductions 3 of which I think we will benefit from being the earned income, student loan interest, and education expenses.

Thanks in advance for any insight and if I left out any vital info thats needed in giving advice just let me know!
 
DeacFromThe919 said:
Alright, tax season is about to gear up and I thought it might be nice to have a thread for questions/comments/advice/concerns???

Anyway I already have a situation I'm looking for advice on so hear goes:

The wife and I just got married in October of 2011. In the beginning of 2011 we were still in Pharmacy school and graduation happened in May. We then moved to Asheville where we both started our 1st real jobs in July. She is completing a 2 year dual pharmacy residency/masters degree program, so she it technically still considered a full time student. She is also employed at the hospital and last year her earnings were around just under $19,000. As for me I work in retail pharmacy up here and last year my total earnings were just under $49,000. We have not kids, are currently renting a house, and aside from the wedding/honeymoon haven't made any bid purchases. We both have a lot of college debt, hers is still deferred but mine (around 100k) has been in repayment since december 2011 (that's when I made the first payment).

So after all that background info I guess the question is do we file jointly or would it be more beneficial to file separate? If we file separate can we file single and separate since we were not married until October of 2011 or do we still have to file "married but filing separate"? I know that the married but filling separate status is good sometimes but it also causes you to loose a lot of deductions 3 of which I think we will benefit from being the earned income, student loan interest, and education expenses.

Thanks in advance for any insight and if I left out any vital info thats needed in giving advice just let me know!
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Just use Turbo Tax (or Tax Act or any of the other online return preparation services) and run it both ways (joint return and married filing separate - if you're married on Dec. 31, you're considered married). My guess is that you will be better off filing a joint return, based on your income (combined, I think that's still in the 15% marginal bracket) and the deductions/credits you'll likely be able to take, but just run it both ways - it will take an extra 5 minutes or so of your time.
 
File Jointly. There are three federal income tax brackets for single or married folks that concern you

Single 10% - everything up to 8,375
15% - everything up to 34,000
25% - everything above

For Married taxpayers those limits double. So by filing separately, you will hit the 25% tax bracket, but by filing jointly, your adjusted gross income is under 68,000, so you will have all your income in the 15% bracket.

Before any other deductions like student loan interest, moving expenses, or tuition paid, for federal purposes I have you as owing $6,437 filing jointly and owing $6,962 filing separately.

You can't file single. The married filing separately thing is mainly for couples about to divorce, or if one person for whatever reason has no income and doesn't want to absorb any potential tax liability of their spouse. Generally you do it if you make no money and think your partner is evading taxes.

You're correct, by filing separately, you won't be eligible to deduct student loan interest or tuition and fees. I'm using this link as a reference.

http://taxes.about.com/od/filingstatus/qt/marriedseparate.htm

There's also a phase out of student loan interest that begins at $60,000 in income (or $120,000 for married couples). Filing jointly will help keep you under this limit. You also make too much to qualify for the earned income tax credit.

You also likely qualify for these tax credits, which would be huge. Lifetime learning credit: 20% of your tuition and fees paid up to $2,000. This is a credit, not a deduction, so infinitely more awesome. If you paid $10k in college expenses, you get $2,000 cash savings on your federal return. You can't claim this if you file separately.

Lastly, don't forget to use any moving expenses not reimbursed by your employer. As long as you moved more than 50 miles, you should be good.

"If you moved to start a new job, or to seek work in a new city, you may be able to deduct the cost of your moving expenses from your income. Qualifying expenses include costs for packing and shipping your household goods and personal property, and costs for travel and lodging.

To determine your true federal liability, I'd take the $6,437, and then
subtract out any student loan interest (up to $2,500), Tuition paid (up to $4,000), or unreimbursed moving expenses; multiply by 15%, and subtract from the $6,437, and subtract the lifetime learning credit.

My guess is you're in for a huge refund. Do you know how much in federal income tax you and your wife paid this year?
 
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My question for CPAs/Tax gurus. Why on earth wouldn't I just get married to some college chick and save a butt-ton of money? Why haven't I thought of this before? My math suggests I'd save $6,400 on federal taxes alone. So next year I can pay some chick $2k to marry me, and save $4,400.
 
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palmab03 said:
My question for CPAs/Tax gurus. Why on earth wouldn't I just get married to some college chick and save a butt-ton of money? Why haven't I thought of this before? My math suggests I'd save $6,400 on federal taxes alone. So next year I can pay some chick $2k to marry me, and save $4,400.
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That's called tax fraud.
 
bernbp5 said:
That's called tax fraud.
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I don't see why it is tax fraud if you're legally married. The law is to be legally married, doesn't say anything about actually being in love or anything.

Are all beards tax frauds then?
 
married filing separate doesn't qualify for the EITC.
 
thanks for all the awesome info palab03! Looks like the withholdings are about 2,200 for federal, 800 ss, and 275 medicare for the wife and 9,700 federal, 2,000 ss, and 700 medicare for me. I'm hoping for a big return!!!

Also my current w-4 deductions are both only 1 for federal and state should I up them so that the gov't isn't getting a free loan on so much of my money for the upcoming year or stick with them the same way?
 
DeacFromThe919 said:
thanks for all the awesome info palab03! Looks like the withholdings are about 2,200 for federal, 800 ss, and 275 medicare for the wife and 9,700 federal, 2,000 ss, and 700 medicare for me. I'm hoping for a big return!!!
Also my current w-4 deductions are both only 1 for federal and state should I up them so that the gov't isn't getting a free loan on so much of my money for the upcoming year or stick with them the same way?
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Your payroll processor screwed up bigtime. Even with only 1 exemption, if you are making $49,000 your standard deduction is $5,950 and your exemption is $3,800. Which means your AGI would be about $39,250.

10% on the first $8,375 = $837.50
15% on the amount between $34,000 and $8,375 = $3,843.75
25% on the amount between $39,250 and $34,000 = $1,312.50.

For a total federal tax of $5,993.75 if they were witholding you as a single person. It seems as if you were way overwitheld because you started your jobs mid-year. So they were witholding your taxes as if you made $98,000/year and your wife $38,000/year, is that closer to what your annual salary is? If you got a signing bonus or an end of the year bonus, generally they overwithold for that as well, which causes a refund.

You'll get a big refund check this year, but next year it will be less. My guess is if you're paying student loan interest, are married, and get some tuition credits, you can probably add an exemption or two to your taxes to avoid loaning money to the govt. If there's big tuiton dollars spent you could likely add many exemptions.

If I knew your annual dollar salaries for 2012, amount witheld per pay period for fed taxes (must know whether paid monthly, 2x a month, or biweekly(26x/year) just look on a 2012 paystub) and amount you will pay on tuiton in 2012, I could tell you how many exemptions to claim. Can PM them if you want.
 
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Since it's a tax thread, anyone know a CPA with experience with clergy taxes?

Sent from my Transformer TF101 using Tapatalk
 
So I have all my W-2s and 1099 thing from some bonds I cashed... now I just get turbotax and voila?
 
lbE08 said:
So I have all my W-2s and 1099 thing from some bonds I cashed... now I just get turbotax and voila?
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Pretty much. Turbotax will show you what you'll need. If you're itemizing deductions you'll need those receipts. If you have any retirement or investment accounts you'll need that.

I'm waiting on one last document from my previous job, but I've got all of my other info plugged in.
 
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