I gotta pay taxes on my 05 tax returns?

[KRS]

Re: I gotta pay taxes on my 05 tax returns?

Originally posted by Mark42:<br />

Originally posted by KRS:<br /> Again, you never paid fed tax on the state withholdings, they're gonna tax it if you get a state refund.

You should be reporting the amount actually paid (amount due) in state tax on the federal return when itemizing. Then there is no issue on wether or not money is taxable. <br /><br />If you do the forms properly, refunded money is not taxable on the following years return either state or federal.

Amount paid and (amount due) are two different things, if by "paid" you mean "withheld".<br /><br />You should show actual state income tax. The dollar figure that results from determining your taxable income, then going to the state tax tables and determining "Total Tax". That way, on your Fed taxes, you deduct what the state actually gets (total tax), while the amount you overpaid (or overheld) and returned to you is taxable the following year to the feds.

 

[jtexas]

Re: I gotta pay taxes on my 05 tax returns?

Originally posted by KRS:<br /> Amount paid and (amount due) are two different things, if by "paid" you mean "withheld".<br /><br />You should show actual state income tax. The dollar figure that results from determining your taxable income, then going to the state tax tables and determining "Total Tax". That way, on your Fed taxes, you deduct what the state actually gets (total tax), while the amount you overpaid (or overheld) and returned to you is taxable the following year to the feds.

General rule, individual taxpayers are REQUIRED to report income & deductions on the "cash basis", meaning transactions are reported in the year in which money changes hands. Example: Let's say at the end of 2004 you owe property taxes of $1,000, which you pay in January of 2005. An "accrual basis" taxpayer would deduct the $1000 on his 2004 tax return. A "cash basis" taxpayer deducts it on his 2005 tax return.<br /><br />Now, if you deduct "Total Tax" as defined by KRS (actual tax liability determined without respect to payments made), then you are on the "accrual basis" and your refund would NOT be taxable.<br /><br />If you deduct "Total Paid" (or withheld), then you are on the "cash basis" and your refund IS taxable in the year you receive it. Or if you owed more tax on your '04 return, and paid it in '05, add that amount to the 2005 deduction.

 

[DJ]

Re: I gotta pay taxes on my 05 tax returns?

CN,<br /><br />The answer is YES, you owe. (THAT'S always THE ANSWER) Don't fight it, just pay it. You cannot afford the fight-trust me.

 

[KRS]

Re: I gotta pay taxes on my 05 tax returns?

.

 

[jtexas]

Re: I gotta pay taxes on my 05 tax returns?

Sorry KRS, here's how it works:<br /><br />2004 state "Total Tax" $1,000<br />2004 state tax paid (withheld) (1,200)<br />2004 refund received in 2005 ($200)<br /><br />Paid $1200, refund of $200, net amount paid = $1,000 - agree? So your federal taxable income should be reduced by $1,000 - agree?<br /><br />Your way:<br />Effect on federal taxable income <br />2004 Claimed as deduction ($1,000)<br />2005 Claimed as income 200<br />Net effect on federal taxable income ($800)<br /><br />That's $200 less than the amount you paid.<br /><br />My way:<br />Effect on federal taxable income <br />2004 Claimed as deduction ($1,200)<br />2005 Claimed as income 200<br />Net effect on federal taxable income ($1,000)<br /><br />See? You reduce your fed taxable income by the amount of state tax you paid.<br /><br />If you only deducted $1,000 in 2004, then you have no income to claim in 2005. If you didn't itemize your deductions in 2004, then you didn't deduct any, so you have no income in 2005.

 

[KRS]

Re: I gotta pay taxes on my 05 tax returns?

I just finished pulling out my last 5 years taxes to verify and removed my last comment then I saw yours.<br /><br />The method you describe is correct. Thank you for persisting so that I could see the light.

 

[KRS]

Re: I gotta pay taxes on my 05 tax returns?

I work with business tax returns in my line of work, and most are on accrual basis.<br /><br />Excellent explanation BTW.

 

[jtexas]

Re: I gotta pay taxes on my 05 tax returns?

s'what I'm here for <br /><br />You went to a lot of trouble to verify...I'm sure I speak for all when I say thanks for your efforts.<br /><br />DJ summed it up though "The answer is YES, you owe. (THAT'S always THE ANSWER)"...some call us "citizens", some call us "voters", but the IRS calls us all "taxpayers". <br /><br />