Get your tax questions answered — free — and a giveaway

Ramit Sethi

Taxes are still confusing to me. So this year, I’m bringing in a tax expert to help answer questions from iwillteachyoutoberich readers. Plus, there’s a giveaway: 5 people who ask questions will get free tax software and their filing fees waived. This is a special deal for iwillteachyoutoberich readers.

Here’s the deal: David Bergstein is a CPA and tax analyst for CCH CompleteTax. He’ll be guest-posting a few times over the next month to answer any tax questions you have. David’s bio:

David Bergstein, CPA, has 40 years of experience in tax and accounting and is well known as a speaker and trainer in the field of utilizing new technology to improve the efficiency of operations in tax, accounting, practice management, and general operations of the accounting process.

Prior to joining CCH, he held various positions with the Internal Revenue Service and as an accounting professor. In addition to his work with CCH, Bergstein also continues to teach taxation and accounting as an adjunct professor at the college level and is an active volunteer with the IRS’ VITA (Volunteer Income Tax Assistance) program where he teaches tax law.

In addition to being a CPA, he is a Certified Information Technology Professional, a credential granted by the AICPA, and holds a Masters of Science in Taxation. Bergstein also is a member of the Florida Institute of CPA’s (FICPA) Business Technology Section and the Accounting Education and Careers Committee.

Ask a tax question! This is your chance to get free tax advice from someone eminently qualified. If you don’t know where to start with your taxes, or you have an advanced question, ask it here (“How do I pay taxes if I’ve never done it before?” “What are the biggest mistakes people make?” “What should I put for the defaults, like dependents?”) He’ll take a look at the questions and answer the most important questions over the next few weeks.

Plus, 5 people will win CCH CompleteTax passes for state/federal tax return prep and filing. (Special thanks to Mary Jung for helping to coordinate this.)

Note: Your question is most likely to be answered if it’s general enough to be useful to other people.

[Update, 3/21/07]: Part 1 of David’s answers are online now.

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  1. Jason

    I know that student loan interest deductions begin to be lowered on a graduated scale after you make over $50,000. However, I have heard that if you use your primary residence as collateral for your student loans, then you may be able to once again deduct your student loan interest in addition to your home mortgage interest deduction.

    Please advise…

  2. Apurva

    My questions are related to relocation. This is my first year filing my own taxes as well. What expenses are eligable to be deducted for relocation? And what if certain items are paid for via points (ie, hotel or airplane tickets)?

    Any help on these questions would be greatly appreicated! Thanks!

  3. Ola

    I interned in California during the summer and worked on campus so I have to file state taxes for both DC and California. I have tried this like a million times but I always seem to get it wrong, what am I supposed to put regarding residency for both states. I was in California just for the summer and was in DC for the rest of the year.

    I am using TurboTax and I don’t understand the residency questions and it doesn’t even seem possible to input the data right. I started the year as a DC resident and ended in DC, was in California just for a while. Can you help me?

    I know this might not be general enough to help other people but I am hoping other people are having issues with residency or it’s a big enough problem that other people generally face

  4. Margo

    I sold some stock this year, which had been on a dividend reinvestment plan. How do I handle this while filing my taxes online?

  5. Rhiannon

    Hi Ramit and David,

    I already filed my taxes, already got my refund. But then my MIL says, “Oh by the way, I have some of your tax forms here.” Uh Oh! She sends us the forms, and I enter it into our tax software. We owe $24 to the Feds and $16 to the state. Not a big deal, but how and when do I send them the money? There must be a special form for fixing a mistake like this, right?

  6. Courtney

    I own my own small business and work from an office in my home.

    Is it better to have my company pay me rent, or to take a home office deduction?

  7. Jonathan

    Hi Ramit and David,

    I am Canadian so my question is specific to Canadian taxes: What is the best source for clear and helpful explanations for filling Canadian Income Taxes?


  8. Sean

    I’d like the intern question answered as well (asked by Ola, comment #3).

    I live in CA but worked over the summer in TX and was not taxed on income while there. I still claim residency in CA so I’m wondering if I need to pay taxes on the income earned while in TX… thanks.

  9. Simmer

    My wife started a LLC last year which she operated at a loss. Would it be better to go ahead and do our taxes myself or take them to an accountant? If I go ahead and do them myself, are there any “gotchas” that I need to look out for pertaining to her business?

  10. Stephen

    I am a soon-to-be-college-graduate, and am already worried about my taxes.

    Last year, I filed my federal taxes without issue. My problem was when i tried to file my State taxes. Since I was in college and had temporary jobs, I had income from 3 different states (MI, IN, and CA). My income was pretty low for all of these states, and some of them were not available to file online. I decided it wasn’t worth the hassle and effort to file my state taxes.

    Should I wait to file my current state taxes until I do my taxes from last year? Should I just forget about my state taxes from last year? What would the consequences be? Thanks for all of the help.

    This question won one of the CompleteTax codes!

  11. Leon

    I run a small online business and I’d love to find out more about the kinds of deductions that I can make any any other ways of running or structuring my business to reduce the tax burden.

    Since I am self-employed I end up paying 7% more on my taxes than those that have a regular job.

    Are there any real tax advantages for a business?


  12. Viv

    My parents make enough money a year to be in the highest tax bracket, but I (20 yr old college student living at home) just started working last year and don’t. Should I file my taxes in conjunction with my parents or should I file independently?

  13. AJ

    I’ll be getting married this year. Is there anything I should do this year to minimize next year’s tax payments?

  14. Taylor

    I’ve never payed taxes before and got a job this year as a consultant at a software engineering services company. Since I am not technically an employee, and am a consultant, I know my tax burden is higher. Is there anything I can do to lessen this?


  15. RK

    I’m a college student filling my own taxes for the first time. Can I claim the hope credit even if it’s my parents that pay tuition, not me? What else should I know?

  16. Julie

    When I do my taxes by hand, thru H&R Block oline and TurboTax, I get different numbers for all of them, which is the best way to go?

    Also, I moved to Boston from San Francisco and I have the whole multiple states issue as well. What job hunting and moving expenses can be deducted?

  17. Jason

    Money from Renters in your Primary residence:

    I am a home owner. I rent out a bedroom to someone, and I charge him a fixed rent, plus a portion of the utilities.

    Turbo Tax doesn’t ask this question, but should I report this money as income? Or does it fall under ‘shared living expenses’, as I’ve heard people claim?

  18. the222

    Out of the last 5 years I have done my taxes maybe twice. This year IRS sent me all the paperwork to catch up.

  19. Sunil

    To Ola (#3) and Sean(#8):
    I’m not a tax professional, but I’m a consultant and file taxes with TurboTax in multiple states, so I know how this works. Ola, you’ll need to file two returns: 1. a CA non-resident return (unless you actually moved, changed your driver’s license, etc. to CA for the time you were there) and 2. a DC resident return. The TurboTax questions can be a bit much, but they’re trying to establish if you were a resident, or just working there. I would say if you were on temporary assignment there as an intern and your permanent address was in DC, you should file as CA non-resident and DC resident. You need to do your CA non-resident form in TurboTax FIRST in order for it to work correctly.

    Sean, you do not owe taxes in TX (obviously), but you do have to pay CA taxes on the money you earned in TX. You can write off non-resident state tax as credit against resident state tax (which is what Ola will do). Since you paid no non-resident tax in TX, you have nothing to write off, and will owe it all to CA. The same thing happened to me two years ago when I worked in TN (which also has no state income tax), but worked in GA.

    Please let me know if that helped. If any tax pro believes this is wrong, please feel free to refute, but this should be correct. also, see this article from turbotax for clarity:

  20. Sunil

    I actually have a question of my own – I was a full year non-resident in CA this year. I have outside investments, which should only be taxed in my resident state (GA). I only got a W-2 for CA, and everything was reported against it. I had 0 withholdings and all income was posted against the state of California, but when I run the return in Turbotax, it says I still owe $220 in CA taxes. How is this possible? I often owe money in my home state because of interest income, dividends, capital gains, etc, but what else could factor in to a non-resident return with 0 withholdings? Thanks!

  21. Stephanie

    My question is very similar to #2. I worked in NY state during the school year and California during the summer, but I was never a legal resident of California – in fact, the address I gave my California employer was my NY state home address. How will this affect my filing? I’ve never filed in two states before, so I’m a bit nervous about it.

  22. Dustin

    State tax aside, is there any law stating I have to pay any amount of my income taxes for the prior year before April 15? For instance, could I have postponed my taxes in 2006 and pay them in full before April 15, 2007?

  23. Nikki

    Here’s a couple of questions for you:
    I’m getting divorced this year. When filing next year, will I file as single or married? Will I be responsible for my ex’s taxes, if he underpays?

    I’m a freelancer. A client I did a lot of work for last year has vanished without a trace…and never sent me a 1099. What do I do?

  24. Aaron Thompson

    Would it be better for a young college student to do his/her taxes by himself without software to learn, or is it worth it to have a program that knows the system better?

  25. Bobby

    As a small business, is it better to be established as an LLC or as a Partnership to get the maximum tax benefits and what are the tax benefits of each?

  26. Mr.Dipstix

    I have so many questions I don’t know where to begin!…lets see…

  27. Eileen

    I am self employed and used H&R Block last year to file taxes. I don’t think I got all the deductions I could have.

    What’s the best way to find a tax consultant AND a financial advisor/consultant (doesn’t have to be the same person)?

    And what kind of pay arrangements are available for those services?

    It seems my business is too small for my local accountant to be interested in working with me and I am not sure where else to go and how much to expect to pay someone.

  28. Adil

    Hypothetically speaking, if I were to move to the US for 1 year from mid 2007 to mid 2008, how would my tax rate be calculated? Would it take into account the amount I earned during the first half of 2007 and latter half of 2008, but only be taxable on the amount earned in the US?

  29. Bryan

    I have a question about withholding. I started plugging in the numbers two days ago and realized that my employer and my wife’s employer had only been withholding something like 3.5% of our gross income. I was recently promoted (with a 50% raise) and I think we might have landed in a different tax bracket without realizing it. According to my calculations, we’re going to owe the IRS something like $1500 for 2006. Help! Is there anything that we can do right now to offset that tax liability and how can we make sure this doesn’t happen in the future? Thanks!

  30. Troy

    My wife and I own a rental condo and a house that we live in. We used to live in the condo and qualify for the 500k cap gain exclusion when we sell this year. We are both on the title of both properties. My question is this: Since our cap gain on the condo sale is less than 250k can we somehow preserve the “other $250k” exclusion for the (potential) sale of our main home (if we qualify properly) … without having to wait 2 years?


  31. Scarfish

    In addition to my full time job, I am an independent contractor for mystery shopping companies, and also a freelance performer for an entertainment company. I’ll be filing a Schedule C for both of these, but for some reason I’m having trouble using TurboTax to accurately calculate what I owe–sometimes I get charged a self-employment tax and sometimes I don’t. Less than 5% of my income comes from these side jobs, so I don’t see how I can be considered truly self-employed.

    What are some other things to watch out for when filing a Schedule C?

  32. Enrique

    How do I make an offer of a setlement on taxes I owe to the IRS?
    What are the requirements?

  33. perry

    I’m in California and I’m losing money every month on a condo I am renting out. When I add in expenses and depreciation, what is the maximum loss I can claim per year to reduce my wage income? Thanks.

  34. Cal

    I occasionally receive relatively large amounts of un-expected un-taxed income during the year (i.e., I sign a book deal). When taxes roll around, I then get nailed with penalities for not having paid taxes on the money earlier. My problem is that I don’t know how to immediately pay some taxes toward un-expected income. I understand how to do quarterly estimates of your un-taxed income, but how can I do such estimates if the money is un-expected. In short, I’m wondering what the procedure is for sending the IRS estimated taxes soon after receiving a large amount?

  35. Andy

    I am a graduate student at a large research university. I, along with a large portion of my colleagues, receive a stipend from a federal fellowship. There are a million rumors about the tax liabilities of this– we don’t see a W2, but we do all have a 1099 on file if we want to download it. So, are our meager stipends taxable?

  36. AJ

    I also want the below question by leon answered:

    ” I run a small online business and I’d love to find out more about the kinds of deductions that I can make any any other ways of running or structuring my business to reduce the tax burden.

    Since I am self-employed I end up paying 7% more on my taxes than those that have a regular job.

    Are there any real tax advantages for a business?


  37. AJ

    Ramit and David,

    Firstly, thanks!
    Secondly, my question:
    I’m from TN, and I recently got a job and moved to NY after college. I am still technically, i think, a TN resident (my car and license are from there), but I have an apt and pay utilities in NY. Are there any tax ramifications/consequences I should know about when filing taxes? Thank again!

  38. Christine

    My Question has to do with taxes for next year. I am expecting a return of about 1,000 dollars, and currently am claiming “1” on my withholdings. Should I change my withholdings for next year? Is this a worthwhile change?

  39. Matt

    Bryan (comment 29), consider yourself lucky! Owing taxes at the end of the year is an opportunity, not a liability. If you have control over your finances (you spend and save deliberately), then the amount you owe in taxes at the end of the year is capital on which you have hopefully been earning interest. I try to minimize my withholding AND know how much I’ll need liquid at tax time. That way I make some interest and I’m not caught by surprise when the bill comes.

  40. AllFinancialMatters » Blog Archive » Get Free Tax Advice Over at IWillTeachYouToBeRich

    […] Ramit over at I Will Teach You to be Rich informing me that he has a CPA friend who has agreed to answer tax-related questions for free. Just click on the link and follow the directions. I’m sure the CPA won’t be able to […]

  41. Bobby

    If I did work for my company internationally (living and working abroad for 3 months), was never sent any forms, and my company is based out of the US, is this taxable income?

  42. Erin

    I’m single and just bought a house. How do I change my deductions and what do I change them to? What is a Head-of-Household?

  43. Dustin L.

    I did a 401(k) rollover this year. I got a 1099-R form for the distribution, but no paperwork for putting it back in. Should I have? If not, how do I show that I shouldn’t be taxed on this distribution?

    The funds were from different employers, but the fund manager is the same for both.

  44. Joel

    If I moved from a state with income tax to a state without income tax (in my case Utah to Washington) in the middle of the year do I need to file my income taxes in the first state. And if I do need to file, do I only put income I earned in that state or does it have to be all income I earned throughout the year?

  45. tim

    I have a question about AMT, as it pertains to stock options. It seems that AMT is the boogie-man of tax planning: everyone tells you to be afraid of it, but no one can describe it in detail or under which circumstances you’re bound to run into it. It also seems that more and more young people could be affected by it in coming years.

    So, the question: I’d like to purchase my partially-vested stock options, let them fully vest, and sell sometime down the line. What are the tax implications of this, with regard to AMT, if our household income is over 100K? Thank you in advance.

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  47. Carol

    For 2005, I was employed at 12.48/hr from 1/1-3/31; unemployed from 3/31-7/31, employed at 32k/year from 7/31 to present. My son lives with my sister in another state, but I pay his college tuition. I am also a student, but the Dept. of Labor pays mine. How do I file; can I take a credit/deduction for his tuition? How do you maximize donations?
    Thank you for the offer of answering questions. There are quite a few here that are very good – don’t know how you’ll pick!
    Ramit, keep up the great work.

  48. Elena

    I just bought a house and expect to have about $31,000 in mortgage interest paid out over 2007. I know I can deduct that on my taxes for next year, but what else can I deduct? Would the mortgage interest be a separate category from Standard Deductions? I’m just wondering if I can be overgenerous with my charitable contributions and lump that together with my mortgage interest deduction. Thanks!

  49. Fred O.

    I just began investing in stocks at the end of December 2006. What are the tax implications of stock ownership?

  50. Eric Grunzke

    I finished school in May and nm now self employed as a contractor. My income stems from a 1099, and I’m told that I probably have to file quarterly. However, I’ve also heard that I can somehow save money by not filing quarterly, and just paying the penalty every year. Is that true, and under what circumstances?

  51. Rich

    I also would like information on paying estimated taxes. This will be the first year I need to pay them and I do not know how much I will be making and do not want to have to pay a penalty if I am wrong. Is there a way to do an actual calculation based on income and pay the actual taxes due instead of estimating? Thanks…

  52. Tom

    Do you need the actual receipts for deductions or will the IRS accept detailed credit card statements showing the exact amounts? I ask this because I use Quicken to keep track f my expenses and I always use a credit card.

  53. Amanda

    My grandmother passed away in January of 2006. She left me 5% of her estate which I received in the form of a check from the Estate Executrix. Recently, I received a K-1 form in the mail and I am confused as to what it means. How do I know if I have to pay taxes on this money? Do I claim the money I received as income?

    Thanks for all your help!

  54. kamikasee

    I am a graduate student right now, but I did an internship last year which allowed me to earn enough to set aside money for an IRA. When I graduate, I expect a starting salary of around $100k. As I look at the options for IRAs, it seems like the Roth IRA is a clear winner. The Roth IRA has qualified early distributions (house, medical expenses) that would be a nice safety net. I also think the tax benefit then vs. a tax benefit now (with the traditional IRA) is more appealing.

    Is there something I’m missing about the benefits of a traditional IRA? Can you make any general statements about what kind of people (e.g. I expect to have fairly high earnings, I doubt I would retire early, etc) should have one vs. the other?


  55. Patrick

    If you’re working overseas, but are being paid by an American company, are you still liable for state income taxes?

  56. Bobby J

    My wifes aunt died this year and left us a little over $150k. We used the money to pay off our second mortgage, two cars, student loans and some credit card debt. The rest ended up in a high interest rate savings account.

    Are there any tax concerns we need to be aware of? My wife is concerned that we are going to get hit with huge taxes.

  57. MsC

    I am a single adult earning under $50,000 annually and I normally file ‘EZ’ because I really don’t have much in the way of assets to make it worh filing something more complicated.

    Last year, I had considerable medical problems that resulted in me going on disability for about a month. When I factored that into my income on TurboTax, I saw my refund of approximately $250 turn into a debt of approximately the same amount. I didn’t earn *that* much while on disability, so why does the tax burden seem to be disproportionately high?

    Also, I’m completely confused about medical expense deductions. Can I take deductions for things like medications? And what about medical procedures that were done in 2006 but not billed until 2007? I’m still waiting for the bill from a surgery in November…


  58. Adam

    Longish question about deductibility of interest paid on home equity line of credit:

    We bought a house this year before we sold our prior house. We took out a HELOC on the prior house (House #1)to cover both the down payment and closing costs on the new house (House #2). For the purchase of House #2, we took a conventional mortgage and a HELOC ($68,650) tied to the equity in House #2. Unfortunately, due to the housing market in our area, we wound up carrying House #1 for 5 months in 2006 after the purchase of House #2. As a result, we found ourselves having to tap further into the HELOC on House #1 for additional expenses that were not related to the purchase of House #2 (but, in some instances, related to upkeep of House #1). How do we go about calculating what amounts of HELOC interest paid on House #1 and House #2 are deductible for the 2006 tax year?

  59. mg

    Excelent site & idea. My question is as follows:

    I’m self employed, and will be paying the IRS a nice amount of money this year as my estimated tax payments weren’t enough. I’ve opened up a SEP-IRA account and made a contribution because I’ve been meaning to do that, and wanted to reduce my taxable income. When I opened the account and made that contribution (in Feb 2007), it didn’t ask for what year I wanted to apply that towards. Do I just get to choose 2006 or 2007, and file my taxes appropriately, or are they going to report to the IRS that the SEP-IRA contribution was for a certain year (or do they even report it to the IRS)?

  60. Andrew

    One quicke question regarding the 1040X:

    I’m in the military, and received my W-2’s as usual in January. I filed in mid-February, and then received a SECOND W-2 for my moving expenses from last year. Now I have to file a 1040X and resubmit my orginal. My question is – how much will the extra ‘income’ affect my return?

  61. Severine Krefton

    This one’s probably easy but still stumps me: I keep hearing that state and local taxes can be deducted from 1040 returns — exactly where and how? Does that require itemized deductions, which I never do?

  62. Beth Quittman

    I own a small business and last year I bought a car which I used exclusively for business. I understand the limits on the section 179 deduction for vehicles (it is not a truck). But can I deduct BOTH the section 179 deduction for the car AND depreciation? Or, if I take the Section 179 deduction, I am not allowed to take depreciation as well?

  63. Scott

    I live in Iowa and work in Illinois for the DOD therefore I pay Iowa income tax. I am moving to Germany, I will have no ties, property or vehicle registration to Iowa and will continue to pay federal tax. Am I required to continue paying Iowa state tax?
    Thanks, Scott

  64. Jonathan

    My question is about deductions for work-related expenses. I have heard people swear up and down that they can deduct all sorts of things that sound crazy to me (cable bill if you work in TV production, clothing if you have a dress code at work, etc.). I’m skeptical of almost all of these, but is there a rule of thumb I should be following? My wife travels for her work for a non-profit, and they don’t give her a per diem. Can we deduct her meals and other travel expenses?


  65. Lauro and Sonia


    My wife and I are naturalized America citizens. Both my parents and my wife’s parents are foreigners living outside the country with bank accounts here in the US. As they are getting old they decided to give us part of their deposits and want to transfer around US 150k to both of us.

    We do our income tax together and we would like to know how we should do this transfer, how to document it and what kind of taxes we should expect to pay for it.

    Sincerely Thanks

    Lauro and Sonia

  66. Nick

    Last year my wife started working, and I forgot to change my deductions, so we’re going to owe. After some rough calculations it seems that it might be beneficial to try Married Filing Separately, with my wife claiming the children.

    So my question is whether the IRS allows this, even if it’s to our benefit? And is it OK for my wife to claim both children? And also, does this happen often – will it raise any red flags?

  67. Matt

    I have student loans and was wondering how can I use that to my advantage to decrease my taxable income? I will be adding a roth IRA too most likely and was hoping that could decrease my taxable income….

  68. synergy

    My husband is Canadian and has Canadian student loans. It’s not advantageous to get a loan in the States because of the interest. Is the interest paid to these loans in Canada something we can deduct like I deduct the interest paid on my loans here?

  69. Megan

    Can I take the deduction for energy-efficient home improvements that were the result of a fire (meaning that insurance $ paid for the improvements)?

  70. Ryan

    My employer reimburses me for my tuition based upon my grades, so the way it works is: I pay the tuition upfront, then at the end of the semester my employer cuts me a check for the amount of the tuition. Because I’m the one who pays the school directly, can I claim tuition credits on my taxes? In the end, I don’t pay anything for my tuition, but according to my school’s records (the tax form they sent me) I’m the one who made the payments to the school – the fact that my company reimburses me is invisible to the school. This feels like a sticky situation so I want to be sure I handle it the right way. Thank you.

  71. jb

    I’m an independent contractor who’s done some work for the U.N., which I believe is not subject to U.S. tax laws. Should I enter the amount earned from them on my Schedule C, just as I would any other client or are there more/fewer requirements? Thanks!

  72. dan

    A bit specific, but i can’t even get the IRS to answer this one. Living in a high priced real estate area, I have owned two properties with my brother. Last year, we bought the second property, carried 4 mortgages for half the year, then sold the first property, paying off 3 of the mortgages (two were HELOC used as down payment on the new house). Our mortgage total for the year was over $1M, though only for 6 months.

    1. Can we average this over the whole year, resulting in a total average mortgage of less than $1M
    2. Each of us are on all of the mortgages…can we each deduct up to the $1M max?
    3. Are the HELOCs considered mortgages, since they were used to buy the new house?

  73. Alex Kaloostian

    An employer I freelanced for didn’t send me a 1099 until March 1st- well after I filed my taxes. Do I have to file an amended return now? Can he get in trouble for being so late, or can I at least hold him responsible for my filing fees or.. something?

  74. Ramit Sethi

    All very good questions. I spoke to David today and we went over some of them.

    Just a quick note to point out that the more generally applicable your question is, the more likely it is to be answered. Unfortunatey, if you have a really esoteric question, you’ll probably have to talk to a professional on your own.

  75. Boris Belfer

    Last year I lost my job in capacity of Director of Engineering Department, where I had a computer, and therefore did not need it home. So, while unemployed I had to buy a cheap computer $500 and fax machine $150 to search and send resumes. Can I deduct it as job search expenses?

  76. Albert

    I never claimed my 1098T when i was a student in college. (My mother claimed me as a dependent the first couple years.) Can i claim any of that now?

  77. Allie D.

    I am a college senior graduating in May. I will make my questions general.

    1. Tax-wise, is it best to squeeze money into paying student loan principle before repayment starts? Can this be deducted as an educational expense?

    2. Is there a way to deduct out-of-pocket school expenses (textbooks, supplies, gas mileage to/from classes) in the same way that business expenses can be deducted? What sort of proof might be needed besides receipts in the event of an audit (for example, keeping the syllabus showing required supplies ans texts). Is it on a federal level, then a state-by-state basis?

    3. Are all IRA deductions tax deductible, or does it depend on the IRA type?

    4. What investments do you recommend that will not require high tax payment?

    5. I will be doing taxes by myself for the first time this year. What are some common mistakes to avoid?

    Thanks! =)

  78. Nathan

    My question is related to having a tax professional do taxes vs. doing them on my own.

    Every year, I’ve paid a professional to do my taxes and received some type of return. This year, I decided to do them myself. Nothing has changed, but doing them myself showed I owe $75 and won’t be getting in return!

    This was with TurboTax online. I then tried it with H&R block’s online service. Exactly same results, and I’ve checked and re-checked. I’m not a homeowner, I’m filing as single, same job too.

    Is it possible that a tax professional has somehow cheated on my taxes to make commission?

  79. R Riley

    I’m 16 years old. I earned around 4000 dollars last year doing online freelancing.
    I have not paid a dime in taxes yet. Do I need to?
    I read about “standard deductions”. Can I deduct all of my earnings with that?

  80. Sri

    I just opened my business S corp last year in november. Do I file that income tax seperately or is it together with my wife’s regular income? I am so confused!! I thought S corps must file quarterly.

  81. Scott

    I own a home with my parents, with 90% of it owned by them and 10% by me (based on a down payment). I have an interest only mortgage and pay the entire amount and all other costs of the home. The home is my primary residece and my parents live elsewhere. Can I write the entire interest expense off on my taxes?

  82. Sonya knox

    Can I claim the Rent I pay as a deduction for 2006? what are the rules on claiming rent that someone pays on a rental in general, may it be an apartment or a home? Do you have be self-employed in order to claim Rent?

  83. Naveen

    I’m not a tax professional (just a graduate student) but based on my personal reading and talking to my mother’s accountant (who did my taxes for a few years):

    35: You still have to pay taxes on any fellowship income that is not used for tuition; so basically, if you’re like me, the stipend you get every two weeks (since your tuition is probably paid directly by your department or advisor). One tax-related advantage to a fellowship is that you don’t have to pay FICA taxes – otherwise known as Social-security/medicare tax. (see
    since fellowship recipients aren’t considered employees (see statement from IRS employee in above article)

    67. You contribute to a Roth IRA with after-tax income (hence no taxes when you finally withdraw) so tax advantage there (but it’s good if you expect that your current tax bracket is much lower than when you are 59.5 years of age)

  84. Justin

    Mr. Bergstein, Everyone,

    One payday my employer underpaid me by $227.81 (208.56 NET after taxes). They wrote me a check with tax deductions already removed, and I considered the problem resolved.

    However, in my following paycheck they deducted my 208.56 NET as a tax item labeled ADVNCE (or ADJUST) and told me I would get my 208.56 at the end of the year by filing my taxes.

    I’m sorry to say that I don’t trust them and I feel they may have made some mistakes with my pay. Does this sound correct tax wise? How could I possibly go about checking that this is factored into W-2 so I can be sure I am compensated? And to make this question more general to everyone: How can a person research this for themselves or get tax answers when you aren’t sure your employer is treating your W-2s correctly?

    I’ve done some heavy google searching and asking around; No answers so far.

    Thank you for your time.


  85. Tracee

    I am a realtor with an s-corp. I have already had my taxes done. I owe alot of money. Is it too late to put some money into a Roth IRA to help? Also, how much of my lease payment on a car can I deduct?
    Thank you ! Tracee

  86. erin

    Hopefully this isn’t too general…

    My sister worked as a freelance massage therapist for part of the year and filed quarterly taxes at least once during that year. Halfway through, she started a full time job and stopped freelancing. Will there be any complications that might warrant having her accountant take care of her taxes this year, or could she pretty easily do them herself?

  87. q

    Will the responses from others be posted somewhere?

  88. Free Tax Advice from a CPA « The San Fernando Valley Blog

    […] accountant buddy of the people over at I Will Teach You To Be Rich will be answering tax questions for people who post questions on their comments section.  Whoever […]

  89. J.R.

    I had a question concerning taxes and investments. But it didn’t directly apply to ‘filing income tax returns’ so I wasn’t sure it belonged in the comments section.

    Basically my wife and I will probably be able to max our my 401k and her 403b (she’s a nurse) this year, as well as fully fund our Roth IRAs. We anticipate being able to save a little more on top of that… but I’m not sure what the best route is to do with the excess money.

    Our 40xx’s and Roth IRAs are pretty much for retiring (the current goal is at 59.5 years old, we’re both 26 now). Our additional saved monies will have multiple goals, we’d like to be able to use it to build additional wealth, but also be able to use it to fund larger purchases ( i.e. finishing off our basement) as necessary/appropriate. Most normal purchases come out of our monthly budget.

    What are smart things to do with your money after you have your retirement accounts maxed out? Is it just continue to buy individual stocks or index funds through a brokerage account? (our retirement accounts are currently mostly in index funds). When we go to sell the stocks for a large purchase, are the taxes going to kill us?

    Basically I’m trying to figure out what’s a smart way to put this money to work, but still have it semi-liquid for when we decide to use it.

    Thanks for all that you do,



  90. Celina

    My husband just started getting honoraria for talks, but I am unsure how to put it on my taxes. I use the short form, we get more money back if we don’t itemize. Can I just include it in income, and then put HON on the line with the amount? That is how I used to handle his scholarship, I just put SCH and the amount we hadn’t used on books.

    This question won one of the CompleteTax codes!

  91. Josh

    I live in one state (NY), go to college in another (VT), and do freelance for companies around the country. I earn wages on all fronts, and am claimed as a dependent. This year I had several w-2’s and a matching number of 1099’s. It took hours for me to try and figure out how to do some of this stuff, and I’m still not convinced I did it right.

    Over the summer I’ll be interning in Geneva, Switzerland, so I don’t even want to know what my tax situation is going to look like next year.

  92. Daniel James

    Tracie – Putting money in a Roth IRA won’t help your taxes at all. Roth’s are funded by post-tax income, but the gains from it aren’t taxed. contributions to a traditional IRA will reduce your taxable income, which is what I think you were looking for. The deadline for funding that is April 17th.

    My question is that I just moved to London where I have a nice job. How will the IRS treat my British income?

  93. kurt

    like many people in new york city
    i’m a self employed independent contractor (freelancer)
    and need an accountant familiar with small business tax preparation issues 
    how can i find one locally
    who can give the right advice ?

    as a self employed independent contractor (freelancer)
    when reporting my gross income for last year
    do i report only the income from employers who sent me 1099-misc forms ?
    which is from each of those employers that paid me $600.00 or more
    or are we supposed to report every dime anybody paid us 
    even if below the $600.00 minimum
    regardless of the source ?

    when i work for different employers 
    as a self employed independent contractor (freelancer)
    every job has fees (a day rate) and expenses (taxi cabs etc)
    is the number used for gross income supposed to be 
    only the total fees that were earned ?
    (example: $50,000.00 fees)
    (example: $10,000.00 expenses)
    or is the number used for gross income supposed to be 
    the combination of the total fees
    plus all the business expenses related to performing those jobs ?
    (example: $60,000.00)
    in other words at what point are the expenses 
    which qualify as deductions
    added or subtracted to the gross fees
    and taken into account as taxable income ?

    whenever i’m paid each check includes the fees and expenses
    which my accountant has been using for the taxable gross income total 
    is this correct or are they using an artificially high number
    because it also includes those job related expenses ?

    my accountant tells me only those expenses i’m reimbursed for 
    as part of those checks count as deductions
    as well as statements i recieve in the mail (example: cell phone)
    is this correct ?

    as a self employed independent contractor (freelancer)
    when adding up my gross income from last year
    are we supposed to go by the dates worked in the calendar year
    which are those days falling between 01 jan – 31 dec 2006
    or are we supposed to go by the dates of the checks written for those jobs 
    some of which are recieved in 2007
    i ask because many of the same jobs started before the holidays in 2006
    aren’t finished until after the holidays in 2007
    and some of the checks for that work
    aren’t paid until after completion of those jobs in 2007
    so where is the line drawn with respect to that income ?

  94. Michael

    Last year I paid $8400 to pay off debt incurred from an S Corp me and my partner closed in 2005. I anticipated this being greater than my tax liability for the year so I exempted myself from taxes on my W4.

    I listed this loss on the K1 as a negative number, and it appears that this loss was deducted from my income instead of reducing my tax due as I had thought it would.

    Right now it looks like I owe $3600. Is there better way to file this loss so that I don’t have to pay any more?

  95. Deborah

    My son’s father and I claim him every other year. When it isn’t my year, why can’t I still claim head of household? I own my own house and pay taxes on it, but can’t claim household head? I ran my claims through Turbo Tax, at first I should have gotten $1695 for a return, but when I took my son off, it went down to $30? What gives, did I file it wrong? Should I have still checked the box for head of household? Can it be claimed after sending the claim in?

  96. Dave

    Hi, I had a CitiBank Student Loan for some of my college tuition. The loan was not fixed and was in the range of 6% or so and rising. I had an offer from one of my unused ($0 balance) credit cards for a 2.99% fixed on the life of a balance transfer, so I did a balance transfer and used the money to pay off this loan and “refinance” it on this credit card. There is an obvious paper trail of these events and that credit card has not been used for anything else since. My question is: can I deduct the interest paid on that credit card balance as student loan interest? Thanks for the help in advance!

  97. embarrassed

    I’m so embarrassed! I didn’t file my taxes last year. I didn’t file an extension. I’m 99% sure that I’m owed a refund but I’m still really scared and in avoidance about this. Is it too late? Should I file last year’s taxes before next year? Am I more subject to an audit? Will there be a penalty?

  98. follr

    My question is in relation to Investor Fees.

    I know if I hire an advisor the expense can be grouped as miscellaneous itemized deduction on the schedule A. However, I am an individual investor and don’t necessarily need to hire and advisor to invest in an index fund based IRA. However, I do subscribe to the premium subscriptions on that I use as a research tool for investing guidance. Can I claim the yearly subscription fee?

  99. ralph maccio

    I want to avoid earning too much interest on my investments so that I still qualify for the earned income credit. Is investing in tax-free municiplal bonds a good strategy for accomplishing this?

  100. H.C.

    I have a question regarding residency, like the #3. I had no income last year b/c I worked an unpaid internship in Boston, then I moved to CA in the fall and started a new job there in Jan’07. Since I didn’t have any income and lived off my savings, how am I suppose to file my taxes regards to the residency? I’m also a head of household filer since I financially support my mom, who doesn’t work. Would this impact my residency filing in anyway?

    A second question would be: I have some money in a 403b w/my old employer in Boston. I’m thinking of converting it to a Roth since I’m going to be at a very low tax bracket for 2006 tax year, but I want to contribute the max amt to my Roth for 2006 tax year, is this allowed? Can I do both? And will my entire 403b acct be considered taxable income and therefore, I need to pay taxes on everything I have in my account?

  101. mg

    When and where will the 5 questions be answered? On this website, on David Bergstein site?


  102. gwb

    How can i file my tax return if I don’t have a W-2 ? I worked as a contractor in the US but did not receive any paperwork from my contracting company. I was paid by a foreign company, can i use my receipts or pay slips from outside the USA ?

  103. I Will Teach You To Be Rich » Tax advice — Part 1 by CPA David Bergstein

    […] Last week, I wrote about CPA David Bergstein’s offer to give advice to iwillteachyoutoberich readers’ questions. There are now over 100 questions on that post. […]

  104. Porkypine

    My husband and I are about to leave our jobs and live abroad for 3 months. We have about $40k in a 401(k) and think this would be the year to convert it to a Roth IRA since our income will be lower than probably anytime in the future (due to not working/living off savings). Is this actually a good idea? Will we really be in a lower tax bracket? Do we have to save for the taxes or can they be taken out of the conversion? Thanks!

  105. Andy

    I moved to california in order to work in the film industry. I got a job working for a director as sort of a combined personal and professional assistant. He is paying me as an independent contractor even though I work 40+ hours a week and always at the same office.

    I know I’m going to be subject to the self employed tax but since I’m not really a buisness, theres only a couple of “Buisness Expenses” I can deduct. It appears like all my pay checks are profit. It seems like I’m paying way more income tax than I would if I wasn’t an independent contractor.

    Assuming I can’t get my boss to pay as an employee, how should I handle this situtation?

  106. Nick

    I just started working as a contractor (1099) in Kentucky, for a company in NC.

    How do I know when and how to make quarterly payments (or some other schedule than just once a year at tax time)?

  107. Sachin

    Hi Ramit,

    Excellent blog and a great topic here.

    I have a question about minimizing taxes. What are the suggestions for a high income couple to do so?

    We are not eligible for the Roth/Traditional IRA and most other deductions (we itemize). The only way I have found so far is 401K contribution. Is there anything else that can help us bring out AGI (or is it MAGI) down?

    Thank you and appreciate your time.

  108. adam w

    can you take a deduction for work clothes/dry cleaning?

  109. katherine

    I will begin receiving my share of ex-husband’s retirement pension next month per QDRO. We have always lived in California. I am planning on moving to the state of Washington soon. Will I have to pay CA state income tax on this in Washington? If I receive an intitial lump sum while now, will I have to pay CA state taxes on that if I were to live in Washington for more that 6 months of this year?

  110. Nick

    I volunteer at my daughter’s school every week. Can that volunteer time be used as a deduction? And how would I calculate the value?

  111. Josie

    My fiance has had his own business for a few years, and I have been doing his taxes each year for him. My question is, he has been claiming me as a dependant, and now I would like to start filing myself, because he is paying me to work in the office in his business. Will this make a difference in his business taxes?

  112. Liz

    Hi Ramit and David,

    Thanks again for taking the time!

    I have a general question – I’m not sure if it has been asked yet, apologies if it has!

    Could you give a general explanation of how various retirement account contributions (in Roth IRA vs. Traditional IRA vs. 401(k) vs. 403(b)) affect tax filing? Which have deductible contributions and which factors are considered in eligibility requirements for those that do?


  113. jennifer craig

    My mother (66 years of age) would like to know if her social security benefits are taxable if she is contributing to an IRA and she also is covered by a retirement plan at work?

  114. L.Z.

    Excellent blog and topic at hand.

    I’d also love to see J.R.’s #89 question answered (though nto entirely tax/filing related).


  115. Sally

    I have a dependent adult child and I give her money every month. She does chores but this money is not in exchange for the chores(she would get the money anyway. She buys things she needs with it(like toothpaste, shampoo, etc.. Is this money taxable(i think it is part of her support i provide for her )?

  116. L.T.

    I havent’t filed for several years because i haven’t made enough money. I read somewhere that I should file back at least six years. Should l do this and is there any way to forego the late fee for filing(i don’t have much money)?

  117. Stefanie

    I’m a divorced mom who does NOT get to claim my little on on my taxes this year. I am the custodial parent, and my child spends over 75% of his time at my home, as apposed to his dad’s home.
    Can I still file as Head of Household? The question/answer part of Turbo Tax online makes it look like I do, but I’m not convinced.

  118. Marshall Middle

    If I start an IRA for myself and my wife can I subtract that from our adjusted gross income and pay a lower tax rate?

  119. JJ

    My ex wife and I divorced as of August 31 and I continued to pay on the house and expenses through September. I started paying Child Support in October. When I tried to file for my taxes she claimed both kids and now I am stuck owing about $1,000 to the government with only 39K of taxable income. What options do I have with this?

  120. Chandan

    I work full-time and participate in my employer’s 401(K) without maxing it out. I also have a side business (S-Corp) that I work on evenings and weekends and whenever I think I can without completely pissing off my wife. I set up a self-employed 401(K) and contribute to it just enough so that my total across both 401(K)s is below the annual limit. My problem is that my CPA tells me that the ‘402(g) limit’ applies only per employer, and not across all employers – while the firm where I have my self-employed 401(K) tells me that its across all employers. End result: I’m confused and play it safe. I would love to save some more in my self-employed 401(K) upto the limit, but don’t (or can’t). So who’s right – the CPA or the firm? (I’m inclined to think my CPA might be wrong, but would love to know for sure).

  121. AB

    I am an international student from India, and I have been in the US for last 5 years. I generally fill out the forms for Non-Resident Aliens.

    This year, my tax software tells me that I am a resident of NY state for the tax purposes. I wonder if I can still claim the Standard Deduction (as opposed to the Itemized Deduction) as per the US-India tax treaty.

    I would appreciate any insight you can give me. Ramit, Thanks a lot for your blog!

  122. Glenn Johnson

    My son Jesse works in S.D. but lives in Minnesota on weekends/ There is no state tax in S.D.. Does Jesse have to pay MN. state taxes?

  123. Jane

    Am I able to deduct health insurance policy costs from my pretax income? My husband owns a small business with no other employees. I know that other companies offer to their employees this benefit, but I don’t know if I can or how to show this while filing taxes.

  124. Lynn Brantman

    Hello Ramit and David,
    Last year I began receiving socail security disability benefits for myself and 1 minor child. Besides being very confused about which forms to use to file, the Irs publication 915 is even more vaguw. I have also heard that the minor’s benefits are not taxable. I have also heard that sales tax is deductable on home and vehicle purchases. I’m also wondering if I can claim any health deductions related to going ‘south for the winter’. I will also need to file Wisconsin taxes, which I have not done in over 20 years. Will my file be red flagged when my residency keeps changing? In prior years, I have been able to file my own taxes, but I am totally confused this year! Thanks for your time;).

  125. James

    If you are given a 1099 form by your employer, do you hae to have a business license as a subcontractor to itemisze deductions such as mileage, clothing, tools or supplies necessary to work, etc.?

  126. Cessna

    If you recieve under $85,000 per year and not in the US for 6 months and not in any country for six months you don’t have to pay income tax on the $85,000 right? But how do you report this to the U.S.? I mean do you state you have not been in the US for the six months or any other country for six months?

  127. Aaron S

    I fall into the unfortunate category of being someone who learned about this blog after filing my 2006 federal and state returns. After doing some thorough reading, I strongly feel that I should contribute the maximum to a Roth IRA for the year 2006. What are my options now that I have filed my taxes and have just days until the filing deadline? And would contributing the maximum to a non-Roth IRA be any different?

  128. Doug

    I have permanent residence but now work 300 miles away. What can I deduct? rent, maintenance, mileage;gas?????

  129. sarah stinnett

    My husband and I bought a home this year. In our offer to purchase we added $3,500 for closing costs. when we went to close we were told that with our bank loan the seller could not pay for certain things $2,300 worth of things that we had to pay that day. We were told at the attorneys office that we could claim that $2,300 in our taxes. I am using turbo tax and have no clue where I am legally allowed to claim that money. I am comp. stuck PLEASE HELP.

  130. I Will Teach You To Be Rich » Last 3 tax code giveaways announced

    […] tax analyst and CPA David Bergstein with CompleteTax for the last couple of weeks. See the 100+ questions here and David’s answers here and […]

  131. Erin

    I did a job for three days. They did the obligatory deductions for FICA and Medicare, but I haven’t seen a W2 from them, despite asking. How should I report this income?

  132. I Will Teach You To Be Rich » Lots of answers about taxes and retirement from David Bergstein, CPA

    […] Here is post 3 of 3 from David Bergstein, professional tax analyst and CPA. Below is an overview of how to think about taxes generally, then David’s answers to specific questions from iwillteachyoutoberich readers on this post. […]

  133. Ramit Sethi

    Thanks for all the questions! Comments for this post are now closed. You can check out all of David’s answers here.

  134. Get your tax questions answered — free — and a giveaway « I Will … | Personal Finance and Me

    […] The rest is here:  Get your tax questions answered — free — and a giveaway « I Will … […]