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Old 01-26-2015, 10:00 AM
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Question Seeking advice for my adopted son

My husband and I have a young man (22 years old) in our life who is like a son to us. He is confused about his tax burden for 2014 and I would like some advice to share with him.

His situation is pretty straightforward:

Gross income for 2014: $20,000 (paid as a 1099 contractor)
Expenses for 2014: $11,200 (approx 20,000 business miles driven)
Individual standard deduction for 2014: $6200

He hasn't paid any estimated quarterly taxes.

He is not a seasonal worker, he owns no real estate, is unmarried and living at home with his parents.

When he figured his own taxes last week, he said his tax burden would be $4300 for the year. Then when he deducted his expenses, he said he was able to get it down to $1600.

Does this sound close to correct? I am not a tax professional but with an income that low and factoring in the standard deduction and his mileage deduction, it seems he wouldn't owe that much. But again, what do I know? I'm just his adoptive mom! LOL... that's why I'm here asking.

I appreciate any and all feedback!

Shoeless



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Old 01-26-2015, 12:45 PM
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Quote:
Originally Posted by Shoeless View Post
My husband and I have a young man (22 years old) in our life who is like a son to us. He is confused about his tax burden for 2014 and I would like some advice to share with him.

His situation is pretty straightforward:

Gross income for 2014: $20,000 (paid as a 1099 contractor)
Expenses for 2014: $11,200 (approx 20,000 business miles driven)
Individual standard deduction for 2014: $6200

He hasn't paid any estimated quarterly taxes.

He is not a seasonal worker, he owns no real estate, is unmarried and living at home with his parents.

When he figured his own taxes last week, he said his tax burden would be $4300 for the year. Then when he deducted his expenses, he said he was able to get it down to $1600.

Does this sound close to correct? I am not a tax professional but with an income that low and factoring in the standard deduction and his mileage deduction, it seems he wouldn't owe that much. But again, what do I know? I'm just his adoptive mom! LOL... that's why I'm here asking.

I appreciate any and all feedback!

Shoeless
i guess you can not claim him as your dependent.
Gross income for 2014: $20,000 (paid as a 1099 contractor)
Expenses for 2014: $11,200 (approx 20,000 business miles driven)
Individual standard deduction for 2014: $6200====>>>>>>>>>when he files his tax return, , heusually has a choice to make: whether to itemize deductions or take the standard deduction. he should compare both methods and use the one that gives him the greater tax benefit. may choose either std mileage or actual method;he can claim 56.5 cents per mile for business miles driven on sch c. It depends on the vehicle he drives and the operating costs of the vehicle. If his vehicle gets great gas mileage, then taking the standard mileage deduction will likely be more beneficial for him more deductible auto expense on sch c. If his vehicle has very high operating costs and low gas mileage, then taking the actual expense deduction may produce better savings for him.so it depends.

He hasn't paid any estimated quarterly taxes. ==========.>>then he needs to pay interest/penalty for not paying quarterly estimated taxes to IRS/state;as he is filing as a sole proprietor and/or a self-employed individual, he generally has to make estimated tax payments if he expects to owe tax of $1k or more when he files his return;he does not have to pay estimated tax for the current year if he
had no tax liability for the prior year; he was a U.S. citizen or resident for the whole year; his prior tax year covered a 12 month period.if not, if he did not pay enough tax throughout the year by making estimated tax payments, he may have to pay a penalty/interest for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1k as said in tax after subtracting his withholdings and credits, or if he paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

He is not a seasonal worker, he owns no real estate, is unmarried and living at home with his parents.=============>>>>>>>>>>as mentioned above.

When he figured his own taxes last week, he said his tax burden would be $4300 for the year. Then when he deducted his expenses, he said he was able to get it down to $1600.======then aslongas his estimated trax liability exceeds $1k, he had to pay estimated taxes to irs/state.

Does this sound close to correct?======>>>not sure hard to tell as I do not have enough personal info for tax liability calculation.he can also deduct his personal exemption of $3900


I am not a tax professional but with an income that low and factoring in the standard deduction and his mileage deduction, it seems he wouldn't owe that much. But again, what do I know?=========>>>>>>>>>>aslongas the amount on line 29/31 on SCh C of 1040 is $400 or excedds $400 then he must fiel return also aslongas the amount on Sch SE line 2/3 is $400 or exceeds $400 he must pay self employer tax to IRS but he can deduct 50% of SECA taxes on 1040 line 27.



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Old 01-26-2015, 02:56 PM
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Quote:
Originally Posted by Wnhough View Post
i guess you can not claim him as your dependent.

Gross income for 2014: $20,000 (paid as a 1099 contractor)
Expenses for 2014: $11,200 (approx 20,000 business miles driven)
Individual standard deduction for 2014: $6200====>>>>>>>>>

when he files his tax return, , he usually has a choice to make: whether to itemize deductions or take the standard deduction. he should compare both methods and use the one that gives him the greater tax benefit. may choose either std mileage or actual method; he can claim 56.5 cents per mile for business miles driven on sch c. It depends on the vehicle he drives and the operating costs of the vehicle. If his vehicle gets great gas mileage, then taking the standard mileage deduction will likely be more beneficial for him more deductible auto expense on sch c. If his vehicle has very high operating costs and low gas mileage, then taking the actual expense deduction may produce better savings for him. so it depends.


He hasn't paid any estimated quarterly taxes. ==========.>>

then he needs to pay interest/penalty for not paying quarterly estimated taxes to IRS/state;as he is filing as a sole proprietor and/or a self-employed individual, he generally has to make estimated tax payments if he expects to owe tax of $1k or more when he files his return;he does not have to pay estimated tax for the current year if he
had no tax liability for the prior year; he was a U.S. citizen or resident for the whole year; his prior tax year covered a 12 month period.if not, if he did not pay enough tax throughout the year by making estimated tax payments, he may have to pay a penalty/interest for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1k as said in tax after subtracting his withholdings and credits, or if he paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.


He is not a seasonal worker, he owns no real estate, is unmarried and living at home with his parents.=============>>>>>>>>>>

as mentioned above.

When he figured his own taxes last week, he said his tax burden would be $4300 for the year. Then when he deducted his expenses, he said he was able to get it down to $1600.======

then as longas his estimated tax liability exceeds $1k, he had to pay estimated taxes to irs/state.

Does this sound close to correct?======>>>not sure hard to tell as I do not have enough personal info for tax liability calculation.he can also deduct his personal exemption of $3900


I am not a tax professional but with an income that low and factoring in the standard deduction and his mileage deduction, it seems he wouldn't owe that much. But again, what do I know?

=========>>>>>>>>>>as long as the amount on line 29/31 on SCh C of 1040 is $400 or excedds $400 then he must fiel return also aslongas the amount on Sch SE line 2/3 is $400 or exceeds $400 he must pay self employer tax to IRS but he can deduct 50% of SECA taxes on 1040 line 27.
Thank you so much for taking so much time to respond! I can't claim him as a dependent as he is not my son, but he does live with his parents. Could THEY potentially claim him and would that make his tax situation better or worse?

Another question just for clarification... when I looked up the standard personal deduction for 2014, the Internet told me that it was $6200. However, you indicated that it's $3900. Can you expand on that?

Again THANK YOU so much!!



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Old 01-26-2015, 10:05 PM
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Quote:
Originally Posted by Shoeless View Post

#1. Could THEY potentially claim him and would that make his tax situation better or worse?

Another question just for clarification... when I looked up the standard personal deduction for 2014, the Internet told me that it was $6200. However, you indicated that it's $3900. Can you expand on that?

Again THANK YOU so much!!
#1no unless he is a full time student and hi sparents meet requireemnts to claim him on their return.

#2;personal emeption for 2014 is $3950 and you are correct the std ded for 2014 is $6200NOt $3,900. sorry about that.



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Old 01-26-2015, 10:49 PM
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Quote:
Originally Posted by Wnhough View Post
#1no unless he is a full time student and hi sparents meet requireemnts to claim him on their return.

#2;personal emeption for 2014 is $3950 and you are correct the std ded for 2014 is $6200NOt $3,900. sorry about that.
Thank you!! I really really appreciate you taking the time!



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