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Old 03-17-2012, 07:21 PM   #21
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Originally Posted by Lisa99 View Post
I have all our past tax statements so can reconstruct the rental property cost basis, depreciation, etc.
And BTW, I didn't put this in "what did you do today, because I'm hoping that if I get stuck that I can ask you guys questions!
Tedious, boring, but not difficult.

The tax returns, not the discussion-board posters.

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Originally Posted by Lisa99 View Post
And thank you for everyone's suggestions.
Midpack, I'm actually doing this year's taxes with last year's return by my computer. I'm going line by line to make sure as I go that I'm not missing anything. I also have all of the completed forms that the tax guy filed so I'll be able to compare that as well.
The one thing I know I'm going to need help with is how to put in the rental properties that we've owned for three years. Turbo tax has a help line and I'm quite sure they'll get several calls from me.
I found that Fairmark's forums were pretty good for tax questions, and TurboTax might have a good forum as well. (When you pop up a help box and click on the "More help" button, they have a link to their forums.) Calling TT on the phone is just going to annoy you, especially this time of year.

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Thanks for the encouragement everyone! Donheff, you've hit on exactly what I'm going to do this year. I'm going to finish the TT-based exercise but not file. Then I'll package it all up and send to the tax guy. I'll consider the $750 for this year's taxes as tuition.
Three hours later and I've just finished with wages and investments. We sold stock options, ESPPs and RSUs. Thank goodness we have good records, but my brain is in protest!
I'm not going to try to tackle the rental properties today because honestly I don't know where to start.
We've owned one property since 2006, bought one in 2008 and one in 2009. So I can't answer the TT question, did you buy properties in 2011, but the data on the houses has never been in Turbo Tax. I have to figure out how to start now but reconsturct where we are financially. We make too much to deduct rental losses, so have significant paper losses that I have to reconstruct.
Anyway, I think I've earned a cold one or three so bye for now!
TT asks about buying properties in 2011 so that it can help you deduct closing costs and handle other buy/sell transactions. You get another chance on rentals.

When you click on "Guide Me", TT will take you through the 10 or so income areas-- or else at some point it'll display all of those areas before moving on to the next. One of those areas will be rental properties.

Your previous Schedule Es will show depreciation on block 20. I don't think that either one of us wants to look up the IRS Pub, but the annual depreciation on your rental properties is taken over roughly 27.5 years or ~3.6%/year. In other words, it's going to be the same number every year on Sched E block 20 for quite a few years.

The other rookie mistake to watch out for is the amount of the depreciation. You can depreciate your rental structure, but land does not depreciate. Your accountant did this correctly or you would've heard from the IRS long ago. So from now on your Sched E is just going to reflect the current income & expenses with the same ol' depreciation.

Although you may not be able to deduct losses, you should carefully consider your answers to the questions about active involvement in the management of your properties. I believe you can also roll most of the losses forward to future years when your income is lower. I'd like to help you more with that subject but... well... it's been quite a few years since we've been able to lose money on our rental.
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Old 03-17-2012, 07:47 PM   #22
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Thanks Nords for the very thorough guidance. Not at all unexpected from you!

I should have known I wouldn't be able to stop for the day. Took a quick break, had an adult beverage and am continuing on.

I have last year's two-inch paper return from the tax guy. I'm matching up line by line and am seeing the loss carryover and depreciation (and yes, the depreciation # is the same year to year and he did not include land).

I also use a property management company, so I have their year end report which includes income and expenses by category. This may not be so hard after all.

What is so fascinating about all this is that until I started managing our investments I didn't have a clue what half of this stuff meant much less how to translate it to our income taxes.

One tiny step for Lisa, one giant leap toward a confident and self-reliant FIRE!
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Old 03-17-2012, 07:54 PM   #23
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Originally Posted by Lisa99
One tiny step for Lisa, one giant leap toward a confident and self-reliant FIRE!
See? It's not so bad.

I used to do my returns by hand, augmented with a big ole spreadsheet. Then I tried MacInTax (now TurboTax). Luxury!

What's really nice is that with the combination of the software making everything easy, plus the ability to peek at the actual forms, much of this stuff is less cryptic to me now, and I can actually do some effective tax planning. That is, I have a better feel for how different kinds of income and spending tweak my taxes, and a better idea of exactly what I need to keep track of for next year.
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Old 03-17-2012, 08:15 PM   #24
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What is so fascinating about all this is that until I started managing our investments I didn't have a clue what half of this stuff meant much less how to translate it to our income taxes.
I'm a big fan of DIY finances. CPAs and CFPs have to be experts on everything, but we only have to be experts on ourselves.

I wrote a post a couple days ago about the "benefits" of doing your own tax returns, and how to be even more organized for next year. It's mainly oriented toward servicemembers & veterans but with another couple adult beverages it'll seem funny to civilians, too...

Tax returns | Military Retirement & Financial Independence
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Old 03-17-2012, 08:29 PM   #25
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Can you get the same (lower) tax rates, that software uses vs table look up?
Not sure what you mean. In my spreadsheet, I programmed the tax calculation to match the taxes shown on those tax tables. Is that what you meant?

Even more important now than when I was working, I am able to closely monitor my projected income as I go through the year so I can pay a reasonably correct amount of estimated taxes for a given quarter. I have my checkbook register spreadsheet linked to my skeleton tax forms spreadsheet so it will automatically adjust itself as I make various payments (i.e. medical expenses, co-op maintenance payments) and receive irregular investment inflows such as cap gain distributions.

When I was working, I also had a non-resident state income tax form linked into the worksheet so I could keep track of that, too. In 2008, the toughest year for doing my own taxes because I had that huge company stock payout, I had the AMT calculation I had to program in. There, I was able to do sensitivity analysis to enable me to make certain estimated tax payments for the best amounts so I would not get surprised later.
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Old 03-17-2012, 09:26 PM   #26
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Found first major mistake by the tax guy. Cost basis for one of the rental properties is off by $100k. Supposed to be $219k, was put in first year as $119k.

Good thing I just caught this. We're selling this year and with the wrong cost basis, we would pay a LOT of taxes not owed!


Now on to amended return for 2010, but at least it's just one year.
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Old 03-17-2012, 10:13 PM   #27
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Good luck, Lisa. I know it's weird, but I do enjoy doing my own taxes. I learn a lot from the process.
Have to agree with FIREd. Been doing my own taxes since day one....that would be when I was 14. With TurboTax these days it really is quite doable for anyone with some time and reasonable ability to follow directions. I have a rental property, consulting income, investment gains/losses, etc, etc. The products today make it much easier than it used to be.

When you consider that an accountant friend of mine said he would probably charge $2k to do my taxes I think it is worth the effort and time.....which I have plenty of!

Key is good records. Makes the whole process much easier.
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Calculating taxes
Old 03-18-2012, 11:51 AM   #28
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Calculating taxes

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Originally Posted by scrabbler1 View Post
Not sure what you mean. In my spreadsheet, I programmed the tax calculation to match the taxes shown on those tax tables. Is that what you meant?
No, I am talking about software (like Taxact) calculating taxes to be lower, then what I would find in Fed Tax Tables. They say they have the IRS approval and I never had a problem (since 2009).

Taxable Income: $33,088
Calculated : $ 2,889
Tax Table: $4,111

It can be a big difference. Am I missing something?

I think I found it - it must be:
Qualified Dividends and Capital Gain Tax Worksheet
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Old 03-18-2012, 12:43 PM   #29
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Ok, so I'm now stuck. Got all the rental properties in, no problem.

Working on K-1s and have passive carryover losses from prior years. The passive carryover question in TT says to put in the amt from box 1, but box one is only the loss for 2011.

Can't figure out where to put the accumulated previous year's losses. I've sent a question to the user community, I'll see what comes back.

I'm officially done for the weekend. Made very good progress and realized it really isn't that hard...until I got to the K-1.
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Old 03-18-2012, 01:04 PM   #30
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I"m in a similar situation as the OP...used to do my own but recently hired a pro since we started rentals. Also when trying to do mine on TT a couple years ago, there was a "glitch" in the TT software for our particular situation (IRA conversion to Roth), and after many hours of reading forums on this "known" issue, discovered TT was not inclined to fix it since it affected so few people.

I may go back someday, but for now I'll pay our pro. He doees ours for $315...including the business taxes.
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Old 03-18-2012, 01:34 PM   #31
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Originally Posted by Sirka View Post
No, I am talking about software (like Taxact) calculating taxes to be lower, then what I would find in Fed Tax Tables. They say they have the IRS approval and I never had a problem (since 2009).

Taxable Income: $33,088
Calculated : $ 2,889
Tax Table: $4,111

It can be a big difference. Am I missing something?

I think I found it - it must be:
Qualified Dividends and Capital Gain Tax Worksheet
That probably is it. My spreadsheet includes the QD and cap gains worksheet so it calcualted the taxes due both ways and picks the lesser of the two as the worksheet does it.
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