TurboTax Support Blog

October 15th is coming soon! Time to Finish Your Extended Tax Returns!

Haven’t filed your 2006 tax return yet? Are you one of those 10 million taxpayers who filed an extension back in April, so they don’t have to file for 6 months?  Well, now’s the time to remember that those returns are due Monday, October 15^th! Only one more weekend to finish that return! 

 You probably haven’t been back to TurboTax since April 17^th so I thought it would be good to give you basic to do list to complete those return(s).  

 

Step 1: Be sure that you can find/open your return

o If using TurboTax desktop

§ Find the icon on your computer

§ Click on the icon

Note: If you have trouble finding the icon, check out:

Find Your Download File (Windows) or

Find Your Return on Your Computer (Mac)

 

o If using TurboTax Online

§ Go to http://turbotax.intuit.com/

                

§ Click on “Continue a 2006 Tax Return”

                                           

 

§ Log in to your return. 

 

 

Note: If you forgot your User ID and/or password, see:

 Forgot Your TurboTax Online User ID, Password, or Security Answer? 

Step 2:  Remember why you extended the return!

§ You didn’t have time to go through the interview? You just crossed your fingers and entered some “guesstimated” numbers on that Form 4868 and mailed it in.

o Find all your tax paperwork (W-2s, 1099s, 1098s)

§ So you didn’t have all the tax papers by April 15^th?

o Dig through those piles of paperwork on your desk and/or phone that stock broker who never returned your call for the cost of your stock sales

§ You wanted more time to “review” all those numbers (and hopefully the refund will magically increase over the 6 months)? 

o Locate the envelope with all your paperwork

 

  Step 3: Open up the return 

 

If using TurboTax Desktop, update TurboTax for the latest forms and software revisions.

 Just click on:  Online/ One-click Updates

 

                                 

 

        If you have any questions on the update, check: One-Click Updates for in TurboTax Desktop

 If using TurboTax Online, you don’t have to do an update; it is automatically done for you!

Step 4: Complete the interview!

The interview will probably open up where you left off 6 months ago. 

If you want to start at the beginning of the interview, click on: Personal Info/ About You

                

Step 5: Be sure that you’ve covered Error Check for your 1040 return

 Click on Federal Review and then Error Check.

 

                                             

                                   With the desktop product, when asked about updates, be sure to click:

                                                         

    Step 6:  Continue through the State Interview screens including its Error Check

 Again, with the desktop product, when asked about updates, click on:

                                          

  

 

Step 7:  Print/ Mail/ E-file your returns!

 E-filing your return(s), do it on Saturday or Sunday !

 Mailing your return(s), be sure the envelope is dated no later than October 15^th! 

Step 8: Be sure to save your tax data file

  Read : Save Your Return (Tax Data File)

 

That’s it! You’re done with Tax Year 2006. Wait a minute! It’s October 2007. Now would be a good time to see how your 2007 tax return might be looking…. Check out TurboTax's Tax Estimator !

Reminder for Teachers - Keep Those Receipts!

It’s back to school and a good time to remind teachers/educators to keep those receipts for all the “ordinary and necessary” school items that they purchased for their classrooms during 2007. In 2002, a tax law act gave such folks the ability to deduct the first $250 of these expenses “above the line” on their tax returns. Prior to 2002, these costs could be deducted only as an itemized deduction on Schedule A. Per the IRS, in tax year 2005, teachers and educators deducted just over $893 million in out-of-pocket classroom expenses. That’s a lot!

First let’s talk about who is considered a teacher/educator. You’re eligible for this special deduction if you’re:

§ A kindergarten through grade 12 teacher, instructor, counselor, principal, or aide

§ Who worked in a public or private school

§ For 900 hours during the school year.

As you can see, college teachers and pre-kindergarten teachers don’t get to deduct their expenses above the line. Also the IRS specifically states that home school parents are not employees of the home school and therefore can’t take the deduction.

The IRS says the following are “ordinary and necessary” expenses for such educators: books, supplies, and equipment (including computers, software, and services).

Here’s an example of “ordinary and necessary” expenses. If you’re a kindergarten teacher, these supplies might be chalk, crayons, and paper if it’s not out of the ordinary for teachers like you, in your area schools, to buy these items for the classroom. A necessary item is one that is helpful and appropriate but doesn’t have to be required. The “ordinary and necessary” expenses do not include the expenses for home schooling. Also the purchase of non-athletic supplies for courses in health or physical education is not included.

These expenses must not be reimbursable. This means that if you could have gotten a reimbursement and didn’t get it, you can’t deduct the expense. There is an exception. If you were reimbursed for your educator expenses and your employer included the reimbursements in box 1 of your Form W-2, you can claim the deduction, because you are being taxed on the reimbursements. However, if you were reimbursed for your expenses and the amount does not appear in box 1 of Form W-2, you cannot claim the deduction for those expenses.

So you’ve determined that your purchases were “ordinary and necessary” and after reading the prior paragraph about reimbursements, you can still deduct the expenses. Let’s discuss the documentation that you need. You’ll keep each receipt and check that the date and amount paid are readable. If there isn’t a good description of the items, write that on the receipt along with how the items were related to your classroom.

Now let’s discuss the amount of the deduction. If you’re that kindergarten teacher and spent $550 on your classroom supplies, you can deduct $250 on the front page of the 1040. You deduct the remaining $300 on Schedule A (Itemized Deductions) under unreimbursed employee expenses.  If both you and your spouse are educators and file a joint return, you can each deduct up to $250 on the front page. if one spouse spends $400 and the other spouse only spends $100, the total front page deduction is only $350 ($250 + $100). The remaining $150 will be deducted on Schedule A.

There is a downfall about the remaining amounts and Schedule A. First, you need to be filing a Schedule A to deduct the remaining amounts. And your total Schedule A unreimbursed amounts, along with other miscellaenous deductions, must be more than 2% of your AGI. Ah! Taxes are such fun! That’s why you use TurboTax to prepare your taxes. TurboTax will ask you the about your expenses and calculate the amount to go on the front page, send the remaining amount to Schedule A and run the 2% limitation. 

If you’re eligible for this deduction and spent the money in 2007, be sure to take the deduction on your 2007 return.  Tax year 2007 could be the last year for this deduction since it is due to expire at the end of 2007 unless Congress extends it (as it did in December 2006.)

For additional information:

IRS - Back to School Tax Breaks

IRS Pub 970 - Tax Benefits for Education

IRS Topc 458 - Educator Expense Deduction

Third Quarter Estimated Tax Payments Due September 17, 2007

If you pay estimated taxes, don’t forget that your 3^rd quarter estimated payments to the IRS (and states) are due Monday, September 17, 2007. The 3^rd quarter is usually due on 9/15 but since it falls on a Saturday this year, you get a couple more days to write the check and get it mailed.

If you are reading this and saying, “What the heck are estimated taxes?” and “Should I be paying them?” then read on…

Income tax is collected on a pay-as-you-go basis. For most of us, that is done by the amounts employers take out of each of our paychecks (based on our IRS Form W-4) and then send to the IRS and state agencies. 

Usually it’s the self-employed folks and sometimes the retired folks who are paying estimated payments. For self-employed folks, four times a year, they need to estimate their income taxes for the year and pay estimates for those taxes and also for their self-employment taxes. Since they don’t have an employer paying the matching amount of their Social Security and Medicare taxes, they have to pay both halves. So their estimated payments are covering both income tax and Social Security and Medicare taxes.

Retired taxpayers often pay estimated taxes if there is no withholding on their pension income and/or they receive hefty income from interest and dividends and the like for which there is no tax withholding.

So when do we employees need to pay estimates? Usually it happens if we receive a high amount of income that’s taxable and there is no withholdings taken out of the income. A typical example is selling an investment, such as stock, for a large gain. We then need to do one of 2 things…either increase our wages’ withholding or pay estimated taxes.

To figure out those estimated payments, check out TurboTax’s Paycheck Withholding Calculator. Find a copy of your 2006 tax return and your (and spouse’s) latest paycheck stub(s). Then go to Paycheck Withholding Calculator. Be sure to select tax year 2007. Answer the questions on each screen. There will be screens that deal with your to-date wages and withholding and expected other income like interest and stock sale. There will be screens dealing with your expected deductions for 2007 such as mortgage interest and real estate taxes.  After you’ve entered all the data, TurboTax will calculate your tax for 2007, take into consideration your to-date wages withholding(s) and let you know how much you may still owe for 2007. Again, you can either increase your wage withholding by changing your W-4 (the calculator will show the change) or pay the balance due as an estimated tax.

For additional information:

IRS FAQ: How do I know if I have to file quarterly individual estimated tax payments?

IRS Publication 505-Tax Withholding and Estimated Tax, Chapter 2.

IRS Estimated Tax for Individuals

IRS Topic 306 - Penalty for Underpayment of Estimated Tax