H & R confused me. Did I get good tax advice?

I was at H & R block today, had my tax returns prepared and now I am more confused than ever. My taxes were prepared by a young girl, she seemed rather moody to me. She did not talk much and explained as good as nothing. I gave her the truthful data concerning my income and expenditures but I have no what she really used as deduction and what not. I just noticed that she did not spell the name of my business right and my name was also misspelled on one form. How can I trust her? She did not staple the print out that she gave me together. It really is a confusion. Nobody at H & R checked her work. She wanted me to sign the papers without giving me time to read them. I did not sign them yet, except their internal H & R papers, e.g. saying that they are pro privacy but pass info nevertheless to other places than IRS. (Does not feel good either.) She asked me also personal matters, which had nothing to do with taxes. I would have not mind told her from human being to human being some private matters but she seemed to me rather hostile. It sure was no pleasant experience. I am a single guy, no kids, do dependents.

The H & R girl used form 1040 and wrote following in the form:

My business income and total income is $12,114.

She deducted $865 one half or self employment tax. Is that right?

She reported that as my adjusted gross income $ 11,258.

She wrote as standard deduction $ 5,150.

She subtracted line 40 from line 38, and wrote $ 6.108 in that line. Under line 42 it says: Otherwise, multiply $ 3,300 by the total number of exemptions claimed on line 6d. She wrote $

3,300 in line 42, and I have no clue why. Under line 44, she wrote that 2,808 is my taxable income. Why? I checked the tax table and taxable income of $ 11,258 for a single guy is $ 1,306 not $ 2,808. Under line 46, it says: Tax. Check if tax is from a [ ] form(s) 8814 b [ ] form 4972. She did check any of these boxes but wrote $281 which she added to my taxes. What is that for? On line 58, she wrote that my self employment tax would be $ 1,712. She added the $ 281 and wrote in the form that I owe $ 1,993 taxes. In line 72, she wrote 0.

In line 76, it says, that line 72 should be subtracted from line 63, and wrote as amount that I owe $2,087. I don't understand it how she got to his amount.

----------------------------------- Then the H & R girl filled in form 2210. She wrote under

  1. Enter your 2006 tax after credits from form 1040, line 59. She wrote $ 281. (I have no clue what this is)
  2. Self employment taxes, she wrote in $ 1,712.
  3. Under required annual payment, she wrote $ 1794.
  4. Under penalty, she wrote $ 94. (Because nobody told me that I have to make estimated payments but I also had no clue how to make estimated payments as I just started and have no clue how much I could earn.)

--------------- She gave me a form 1040, Scedule 10 She wrote in as income $16,794. This number is correct as that is the amount of money that my customers paid me and my only income. I had start up expenses of approx. 900 Dollars in Dec. 2005. I bought a computer for 1119 $ this year for my business. She just deducted that computer with $ 40. She wrote that it is a 7 years property. (I never had a computer that lasted 7 years, they usually make troubles after 1-2 years. You might be able to deal with it privately but when your business depends on it, you need a really reliable computer, not one that freezes up all few minutes.) And she calculated my total expenses, all business expenses just with $ 261? How is that possible? On line 29, she claims that my tentative profit is 16,533. She deducted $ 4,419 expenses for business of use of my home. (I use the large room as business office, as I just have a one bedroom apartment and can't work in my tiny bedroom or can't tell people to visit me in my bedroom, as I do not run this kind of establishment.) She also added $ 10 for other computations, total tax preferences and adjustment, and I have no clue why and for what that was added. She said I should mail the IRS a check with $ 2,087 and to my State Tax Commission another check with $153.

----------------- Otherwise, somebody in my family died and I brought her (good) stuff to a non profit organization like Salvation Army. They gave me signed receipts and they amount to approx. $1000. That H & R girls said that I can't deduct anything as a private person because I deducted already so much as a business. Really? Is that true? I can't believe it.

Could you look over that and tell me what you think of this?

You advice is greatly appreciated.

Konstantin.

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Reply to
KonstantinSolomon
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$12114 x 0.9235 x 0.153 = $1712 SE tax. Half that is $856. So either either she made a $10 mistake or you typoed the amount.

$12114 - $856 = $11258, so that's correct.

Assuming you're under 65, that's correct.

That's correct.

Because you get one exemption for yourself. Again, she's correct.

Because $6108 - $3300 = $2808. Adjusted gross income minus deductions minus personal exemptions is taxable income. She's still correct.

Your taxable income is NOT $11258. Your taxable income is $2808.

That's the income tax on $2808 of taxable income.

That's correct.

That's correct.

Since you apparently made no estimated tax payments, that's correct.

Because form 1040 is designed badly and it's not obvious that line 76 includes the penalty computed on Form 2210 and reported on line 77. She computed you owed a $94 penalty and $94 + $1993 = $2087. So assuming she computed the penalty correctly, line 76 is also correct.

As previously stated, it's your income tax.

Which it is.

There's no such thing as a "Schedule 10". Presumably you mean "Schedule C".

I believe computers are actually 5-year property, according to the IRS depreciation rules. Also, you very likely could have elected to write off the whole $1119 this year by making what's called a "Section 179 election".

Well, what business expenses did you have? Unless you tell us, we can't evaluate whether she did it correctly or not.

Assuming you use that large room *exclusively* (and that term is taken literally by the IRS) you can indeed deduct a fraction of your rent as a business expense. One way to get that fraction is what percentage of total apartment square footage the business space is. If the large room is a large fraction of the size of the apartment, the $4419 may be correct. However, if you do not literally use the room exclusively for business, you can't take this business deduction.

That's incorrect (assuming you understood what she said). However, it very likely doesn't matter, since you either take the standard deduction or your itemize. Unless your itemized deductions (which do NOT include business expenses) is more than your $5150 standard deduction, there's no point in itemizing. Which does mean you get no tax benefit from the donation.

Reply to
Rich Carreiro

Other than I do not know what a schedule 10 is, everything else is correct. The business tax form for self employed is schedule C. This is your tax and self employment tax (social security).

Missy Doyle

Reply to
Missy

Dear Rich,

thanks for your explanations. I understand much better now.

She used additionally to Form 1040, a Form Schedule SE 1040 - but no schedule C.

Konstantin.

Reply to
Konstantin Solomon

(balance snipped for brevity.)

You know Rich, I think if I were you, I'd have to send him a bill because your analysis was outstanding.

Compliments.

ChEAr$, Harlan Lunsford, EA n LA

Reply to
Harlan Lunsford

Missy, thanks

Konstantin.

Reply to
Konstantin Solomon

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