Tax Question-Am I screwed?

Hugh R · 02-19-2007, 10:00 AM

Any tax preparerer's, CPAs, Finance Guys I can PM with a tax question. I'm about $1,600 too high on my W-2 to take advantage of the $7,000 college tuition tax credit for my daughter for 06. If I'd taken out that amout in pre-tax contributions to my employer's 401K I'd be OK, but it appears that I can't make a contribution to my IRA to drop that Line 1 amount on the 1040, am I screwed? I could have contributed more to my 401K, but didn't. Thanks for any insight.

pwd72s · 02-19-2007, 10:04 AM

The way I understand it, you can contribute to a 2006 IRA until April 15, 2007....Nice of them to allow a bit of tax planning, yes?

Hugh R · 02-19-2007, 10:08 AM

That's what I thought, but according to Turbo Tax, if it didn't go into an employer 401K by 12/31/06 I can't write it off to get below the threshold where they deny me the College tuition tax credit.

widgeon13 · 02-19-2007, 10:24 AM

You have to have funded your 401K by the end of the year (2006). A separate trasaction would be to fund an IRA for 2006, which you have until April 15, 2007 to accomplish. Turbo Tax should see 401K and IRA's as different investments.

Flatbutt1 · 02-19-2007, 12:05 PM

Perhaps starting a Roth would work even though it is after tax?

Hugh R · 02-19-2007, 08:41 PM

Thanks, but the way I read it, the Feds treat 401K and IRA contributions differently. I could have contributed more to my 401K and gotten under the $160K adjusted gross (line 37 on the 1040) and gotten the tax credit for college tuition, but because I didn't, I can't take the deduction with the IRA even though its before 4/15/07. Any thoughts? I hate the IRS.

widgeon13 · 02-20-2007, 02:45 AM

I think I now understand the problem, your AGI exceeds the amount that allows for a deductible IRA so you are correct, unless you have other deductions you will not be able to reduce your AGI with the IRA contribution. You could contribute to the IRA but it is a non-deductible contribution.

I don't have any ideas on how to reduce your AGI by the necessary $1600 in order to acheive the AGI to get to qualify for that college credit.
Any uninsured losses or stock sales that had a net loss. What about contributions to church or charity or medical expenses that could be deducted?

Hugh R · 02-20-2007, 11:49 AM

A CPA friend my wife's suggested losses on my former business for which I did make some income in 06, and a lot of expenses. Thanks guys.

red-beard · red-beard's Garage

I would check your AMT before going any further. The rest of the exercise may not be worth the trouble.

BGCarrera32 · 02-20-2007, 04:42 PM

You pay taxes, you are screwed.

Jims5543 · 02-20-2007, 04:48 PM

Why do people insist on doing their own taxes?

Hire a GOOD CPA (mine is an ex-IRS auditor) and let them make the decision based on their education.

Hugh, your a medical consultant for the movie business, how would you like it if the movie studio decided to save a few bucks and use the book keepers for the medical decisions?

I messed with my own payroll and taxes for my 1st 3 years in business. I made 1 mistake with the state to the tune of $300 after all the fines and stress they put me through it ended up costing me $1200.

I hired a CPA to get me out of my mess and never looked back.

Hugh R · 02-20-2007, 05:01 PM

Actually, Jim I'm a safety person for the Biz, but I get your point.

Jims5543 · 02-20-2007, 05:06 PM

MY post was meant to be a good thing for you, GET A CPA and stop doing your own taxes.

My Personal and Corporate taxes are prepared every year for me and it costs a LOT less than you think. Something like $700 for both prepared and mailed in for me.

Also, the IRS came calling about 2 years ago, they were not very nice and tried to intimidate me, they brought a camera to my place of business and took pictures of my office and cars parked in front.

I called my CPA and handed to phone to the IRS field agent, the next thing I knew the IRS agent said good-bye and left. My accountant had the field agent come to her office to dicuss what the problem was. I never heard from the IRS agent again.

Every penny I have spend with my CPA was made worth it that day.

tc-sacto · 02-20-2007, 05:08 PM

Quote:

Originally posted by Jim Cesiro
Why do people insist on doing their own taxes?

Hire a GOOD CPA (mine is an ex-IRS auditor) and let them make the decision based on their education.

I hired a CPA to get me out of my mess and never looked back.

No kidding, the last time I did my taxes I spent about 8-10hours when all was said and done. (gathering receipts etc.). If I were to bill myself at my rate, = $1400 minimum cost. The next year I hired a CPA for $300.00