Tax season is here, and most of us have questions. Ironically, the horse's mouth, the IRS, isn't a foolproof place to go for answers. A Treasury Department study in 2002 discovered that 43% of its investigators' questions got incorrect answers, if they got answers at all. After an IRS dispute of the numbers, the percentage of correct answers was adjusted upward, to 67%. Still, that's only two out of three.
So where should you go with your questions? By all means, do ask the IRS, or peruse its website at www.IRS.gov. You can look up forms, publications, and instructions there. You can consult a company that specializes in tax preparation, such as H&R Block
We've got a handy Tax Center ready for your business (well, actually, it's free), full of informative articles prepared by our own TMF Taxes, Roy Lewis. We've also got a Tax Strategies discussion board, where people like you are getting answers and opinions from fellow Fools, some of whom are even tax professionals. Pop in and see what folks there are saying, and perhaps ask some questions of your own. You can try our entire discussion board community free for 30 days if you're not already a member.
Here are just a few questions I spotted on our board recently:
- Numbrel asked, "My husband is a historian. When we are back in Colorado visiting relatives, he does research part of the time we are there. He travels about 40 miles round trip to the library where he does the research. Can we take a deduction on Schedule C somewhere for mileage -- to and from the library (he does have income that falls under self-employment)?" And ptheland, a CPA, replied, "That's what I'd do. Maintain the appropriate records, and you shouldn't have any problems."
- Ferjen posted a note saying, "Just wanted to make sure... that if health insurance is deducted from a paycheck on a PRE-TAX basis that you cannot deduct it on your return as well. Because if you can, have mercy, I'm going on (a big) vacation!" jwt0001 replied, "No, you cannot claim it. You already received a tax benefit." And lorenzo2 added, "Or you could try to claim it again, and possibly get a (big) vacation [in prison]!"
- Jacabardo asked, "I was wondering how the Microsoft
(NASDAQ:MSFT)special dividend is treated on my tax return. Can I use a 1040EZ, or must I use a 1040A or something else? I only had about 25 shares at the time but I'm sure I need to report this dividend." Dusty2004 replied, "Like all dividends, it has to be entered on Schedule B if you are filing 1040 or Schedule 1 if you are filing 1040A.
- Bjwheels presented this situation: "I am a buy and hold investor, never having had to sell a position for a loss. Soon to be retired (in two years), I want to rebalance some things. I have two mutual funds that haven't fully recovered from the tech wreck. My question is: if I sell at a loss, how do I report it? Does this lower my adjusted income and my tax liability? My thinking is that it should and if I know my tax bracket, I may be able to stay under or even drop to a lower one." TMFPMarti replied, "You report the sale on Schedule D of the 1040. If Schedule D shows a net loss for the year, up to $3,000 of the loss goes to line 13 of the 1040, reducing your AGI and, ultimately, your taxable income. The balance of the loss is carried forward to the next year. You can read a lot about netting capital gains and losses in the FAQ."
For more, drop in on the Tax Strategies discussion board.
Longtime Fool contributor Selena Maranjian owns shares of Microsoft.