On Federal Income Taxes - Week 1
I've learned (or almost learned) a few interesting things about taxes this week.
Vow of Poverty
If you take a vow of poverty and turn over all your earnings to your church, you may or may not have to declare that income. If you work for the church or an affiliated group and have to do this work as part of your religion, you don't declare it. If you work for a third party and it's not required (even if it's recommended), then you do have to declare it. I'm hoping the church would pay any taxes you owe.
Fraud
Violent street gangs are now getting into tax fraud. You don't have to do as much work as dealing with illegal drugs.
People with post office box addresses only and people in prison were caught claiming the house buyer credit last year.
And there's the ever-popular claiming dependants who aren't your own.
Income Sources
Nowadays, most income is earned, reported on W-2s. In the 1930s(?), only 20 - 25% was earned, about 36% was from investments, and the rest was from self-employment.
What's Marriage?
I already knew that the IRS now recognizes same-sex marriages and just recently learned that this will be true even if the state you live in does not recognize the marriage. This means these couples get to/have to file as married.
For common-law marriages, the IRS considers you to be married if your current state considers you to be married OR if the place you originally got married considered you to be married at that time.
I have not learned anything about group marriages.
Married Filing Separately
You pretty much always pay more taxes filing separately than jointly. In community-property states like mine, this is also called "married-filing-stupidly." So why do people do it?
My favorite: the IRS can't come after you for taxes your spouse owes. I know someone who had her checking and/or savings accounts emptied by the IRS to pay her spouse's taxes which he hadn't gotten around to paying. So if one of you has your own business and doesn't always have the cash flow/foresight to pay your taxes in a timely fashion, you could file separately.
Probably any time you don't feel comfortable signing a joint return, then you should consider doing your own.
Another good reason--you're married but have no idea even where your spouse is let alone what his or her income, deductions, etc. are. You think most people keep pretty good track of their spouses, but, you know, things happen sometimes. The example they gave us was of a common law marriage. There's no such thing as common-law divorce.
Things get more complicated in community property states because you still have to know your spouse's income (because half of it is yours and vice versa).
Required Fields
There are little black triangles in front of required fields. I can't believe I never noticed these before. Tunnel-vision! It's a good think to double-check when I think I'm done.
Favorite Talk-Like-a-Pirate-Day Post - The surprisingly related Avast, me tax hearties! Taxes, treasures, ransoms and more, arrrrr, on International Talk Like a Pirate Day on Don't Mess with Taxes
"Before we broke away from Great Britain, we had relied on that country's vaunted naval force to help protect colonial ships from Barbary Coast pirates. During the Revolution, Benjamin Franklin helped hammer out a 1778 treaty that called on France to help protect American vessels against Barbary pirates.
"The hijackings of American ships continued, however, ...
"So piracy on the high seas was one of the first uses of taxpayer supported military force."
Includes a movie trailer.
Quote of the Day - "I had to fight with a dimwitted undergraduate cashier to get a subpar panino with mass-produced pesto, in which I think the main ingredient is lies." - at I Hate Everything
Actually, I also liked this quote from that same post: "And before you say that there's no such thing as a lovely salad, there is too, if you put enough goat cheese and apples in it."
Vow of Poverty
If you take a vow of poverty and turn over all your earnings to your church, you may or may not have to declare that income. If you work for the church or an affiliated group and have to do this work as part of your religion, you don't declare it. If you work for a third party and it's not required (even if it's recommended), then you do have to declare it. I'm hoping the church would pay any taxes you owe.
Fraud
Violent street gangs are now getting into tax fraud. You don't have to do as much work as dealing with illegal drugs.
People with post office box addresses only and people in prison were caught claiming the house buyer credit last year.
And there's the ever-popular claiming dependants who aren't your own.
Income Sources
Nowadays, most income is earned, reported on W-2s. In the 1930s(?), only 20 - 25% was earned, about 36% was from investments, and the rest was from self-employment.
What's Marriage?
I already knew that the IRS now recognizes same-sex marriages and just recently learned that this will be true even if the state you live in does not recognize the marriage. This means these couples get to/have to file as married.
For common-law marriages, the IRS considers you to be married if your current state considers you to be married OR if the place you originally got married considered you to be married at that time.
I have not learned anything about group marriages.
Married Filing Separately
You pretty much always pay more taxes filing separately than jointly. In community-property states like mine, this is also called "married-filing-stupidly." So why do people do it?
My favorite: the IRS can't come after you for taxes your spouse owes. I know someone who had her checking and/or savings accounts emptied by the IRS to pay her spouse's taxes which he hadn't gotten around to paying. So if one of you has your own business and doesn't always have the cash flow/foresight to pay your taxes in a timely fashion, you could file separately.
Probably any time you don't feel comfortable signing a joint return, then you should consider doing your own.
Another good reason--you're married but have no idea even where your spouse is let alone what his or her income, deductions, etc. are. You think most people keep pretty good track of their spouses, but, you know, things happen sometimes. The example they gave us was of a common law marriage. There's no such thing as common-law divorce.
Things get more complicated in community property states because you still have to know your spouse's income (because half of it is yours and vice versa).
Required Fields
There are little black triangles in front of required fields. I can't believe I never noticed these before. Tunnel-vision! It's a good think to double-check when I think I'm done.
Favorite Talk-Like-a-Pirate-Day Post - The surprisingly related Avast, me tax hearties! Taxes, treasures, ransoms and more, arrrrr, on International Talk Like a Pirate Day on Don't Mess with Taxes
"Before we broke away from Great Britain, we had relied on that country's vaunted naval force to help protect colonial ships from Barbary Coast pirates. During the Revolution, Benjamin Franklin helped hammer out a 1778 treaty that called on France to help protect American vessels against Barbary pirates.
"The hijackings of American ships continued, however, ...
"So piracy on the high seas was one of the first uses of taxpayer supported military force."
Includes a movie trailer.
Quote of the Day - "I had to fight with a dimwitted undergraduate cashier to get a subpar panino with mass-produced pesto, in which I think the main ingredient is lies." - at I Hate Everything
Actually, I also liked this quote from that same post: "And before you say that there's no such thing as a lovely salad, there is too, if you put enough goat cheese and apples in it."