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Old 07-18-2011, 11:29 AM
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Join Date: Jul 2011
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First Time Home Buyer

Hi.

I am just out of school and looking to buy a new home with my Fiance. However our financial situation is a bit of a mess. I am claimed as a dependent on my parents taxes. I work for my fathers construction company, and well as various other construction jobs. But i'm mostly paid in cash. I have no W-2's or tax record to show a bank. And therefore cannot qualify for a mortgage. My Fiance only works part time, and cannot qualify for enough to buy a home on her own. Is it possible to pay 2010 taxes now in order to have some kind of tax record? If so how much would I have to pay? How would being claimed as a dependent affect me?



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Old 07-18-2011, 10:48 PM
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“ Is it possible to pay 2010 taxes now in order to have some kind of tax record?”--> Of course; however, you CAN’T get an automatic 6 month extension for your return; if you are not able to file your federal individual income tax return by the due date, you may be able to get an automatic 6-month extension of time to file(an extension on your filing date does not extend your tax due date. You still MUST pay tax by due date.)To do so, you must file Form 4868 by the due date for filing your calendar year return (usually April 15) or fiscal year return. So, you are subject to penalties; since you did not file by the due date, the IRS will assess a failure to-file penalty of five percent of the tax due, per month, up to a maximum of 25 percent. If your return is not filed within 60 days of the due date, your penalty is a minimum of $100 or 100 percent of the tax due, whichever is less. Also the failure to pay penalty is one-half of 1 percent per month. Interest also applies to taxes paid after the due date. Because the U.S. has a pay-asyou-go tax system, you might have to pay a penalty if you don't have enough tax withheld from your wages that you earn from your job. As you are paid in cash, and as long as you live in a state that maintains state income tax( 9 states DO not impose income taxes to residnets), you must report your income through a federal and state personal income tax return. In general, your ER, your father, who distributes cash instead of paychecks to his employees usually prepare W-2 forms each year that describe total employee earnings. However, as your dad pays cash to independent contractors who are not considered his employees. People who are self-employed or independent contractors typically receive 1099MISC forms that state total earnings. So you need to classify your status as either an EE or an independent contractor; then you should calculate how much (gross or total) money you earned. If you are self-employed (work for yourself like as an independent contractor) and received more than $400, then you must pay a self-employment tax on your earnings; as long as the amount on Sch SE line 4 is $400 or exceeds $400 as a dependent of your parents. you are subject to self employment tax, 13.3% for 2011. If you regard yourself as an EE of your parents, then you need to get W2 from your dad.
“ If so how much would I have to pay?”--> It depends on your taxable income amount.
“ How would being claimed as a dependent affect me?”--> As a dependent of your parents, it depends on the situation; as single dependent( as you are not married yet), you MUST file your return as long as your unearned income,i.e, interest , dividend income or etc, was over $950 or your earned income was over $5,700 OR your gross income was more than the larger of $950 or earned income plus $300 BUT up to $5,700. For example, assume that your gross income was, in 2010, $10,000, then as $10,000> $5,700;$5,400+$300, you MUST file your return.



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Old 07-19-2011, 08:46 AM
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Join Date: Jul 2011
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Just to Clarify

Ok so If i consider myself independant I should fill out (or have my dad fill out) a 1099 MISC? And then use which form to file? 1040, 1040-A, 1040-EZ? And do I fill out a Schedule A, Schedule C, Schedule SE?

And as for 2011 when should my dad start taking out witholding so i'm not faced with the same problem next year?



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Old 07-19-2011, 09:21 AM
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“Ok so If i consider myself independant I should fill out (or have my dad fill out) a 1099 MISC?”--->Not you but your ER, the payer.You need to file Form W-9 that is sent to you; Form W-9 is the IRS form used by a company to request your taxpayer identification number. By submitting a W-9 to your ER, you are certifying that the tax id number you are providing is correct and accurate. You need to get a blank Form W-9 to fill out if you or your business are hired to provide services to another company. If a business pays you $600 or more as a non-employee,as you are an IC, it is legally required to report it to the Internal Revenue Service (IRS), using a 1099-MISC form.
“And then use which form to file? 1040, 1040-A, 1040-EZ? “--->As long as you do not itemize your deductions on 1040 Sch A, you must use either 1040A or 1040EZ. Please visit the IRS Website here: Tax Topics - Topic 352 Which Form – 1040, 1040A or 1040EZ?
“And do I fill out a Schedule A, Schedule C, Schedule SE? “---> It depends on the situation; as said above, as long you itemize your deductions,i.e, your medical expenses, mortgage interest expenses, or real estate taxes or etc on 1040 Sch A,then you need to file Sch A. As an IC, yes you MUST file Sch C of 1040 as long as your net earnings, I mean the amount on Sch C line 31, is $400 or exceeds $400; You may have to still file Sch c to deduct yur Net operating losses if you have.Also as long as the amount on Sch SE line 4 is $400 or exceeds $400, then you need to file Sch SE and you need to pay quarterly selfemployment taxes. The 2010 Tax Relief Act reduced the self-employment tax by 2% for self-employment income earned in calendar year 2011. The self-employment tax rate for self-employment income earned in calendar year 2011 is 13.3% (10.4% for Social Security and 2.9% for Medicare). For self-employment income earned in 2010, the self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance). Also if you are filing as a sole proprietor and/or a self-employed individual, you generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. However, you do not have to pay estimated tax for the current year if You had no tax liability for the prior year; you were a U.S. citizen or resident for the whole year ;your prior tax year covered a 12 month period.
Please visit the IRS Websites here:
Self-Employment Tax (Social Security and Medicare Taxes)
Estimated Taxes
http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
http://www.irs.gov/pub/irs-pdf/f1040sse.pdf
“And as for 2011 when should my dad start taking out witholding so i'm not faced with the same problem next year?”-->It depends on your situation. It is critical that your dad, as a business owner, correctly determine whether you providing services are an employee or independent contractor. Generally, your dad must withhold income taxes, withhold and pay Social Security and Medicare taxes, FICA taxes , I mean from ypur paychecks and pay unemployment tax ,i.e., Federal unemployment tax, or state unemployment tax or etc.on wages paid to you, an employee. However, Your dad does not generally have to withhold or pay any taxes on payments to you, as an independent contractor. As said above, as long as you are an IC, then you need to file and give W9 to your dad(By submitting a W-9, you are certifying that the tax id number you are providing is correct and accurate) and your dad need give you 1099MISC as long as your dad’s business pays you $600 or more as a non-employee, as an IC. it is legally required to report it to the IRS, using a 1099-MISC form. If you arer an EE, then your dad must file a W2 form for you for whom he pays wages or withhold income, Social Security or Medicare tax, federal tax from your paychecks. Your dad must send a W2 form toyou no later than January 31 2012 as you become his EE in 2011.
Please visit the IRS Websites here: http://www.irs.gov/pub/irs-pdf/fw2.pdf
http://www.irs.gov/pub/irs-pdf/fw9.pdf?portlet=3



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