Ask Tax Dad: Professional Organizations, Accident Settlements, And No Refund In 2014

Just over two weeks to go.

Just over two weeks to go.

Usually, our staff Certified Tax Cat handles readers’ questions about taxes, but caught his tail in an antique adding machine and is out on medical leave. Filling in for him is Laura’s dad, a retired accountant and independent tax preparer. The April 15th filing deadline is coming up, and Tax Dad is here to dispense his wisdom in between e-mails gently urging his daughter to just send over her 1098-E already.

On to the questions!

Dear Tax Dad,

I’m a member of several professional organizations, which I pay for because my budget at work doesn’t allow for these memberships. My questions is can I deduct my memberships from my taxes? Each professional membership is a non-profit; one has a congressional charter and they all relate to my profession and I am active in these organizations.

Thanks,

E.

Dear E,

Based on your description, it sounds to me that you could deduct the cost of these memberships, if they are required in your job (no fish&game clubs).

The clincher is that you must be able to itemize your deductions on schedule A, and these deductions would fall in the miscellaneous category, so your total miscellaneous deductions must exceed 2% of your income. You do the numbers, or let your tax software do it.

Hi Tax Dad,

I’m pretty on top of my taxes, and I can usually take care of the tax prep myself. One area I would like to get help with is managing W-4′s for the next tax year to maximize my income throughout the year, instead of getting a big refund at the end.

What are some good resources to calculate withholdings throughout the year based on what I expect for the next year, deductions, children, etc.? I haven’t been able to find any good calculators online or through Turbo Tax. I live in California if it matters.

Thanks,

Nikolai

Nikolai: It is a pretty simple process, if you know approximately how much you will earn and your deductions. I cannot recommend any software just for that purpose, but the worksheet that comes with your W-4 should do the job in most cases.

Remember that if you do your W-4 and find you are being under or over-withheld, you can change your deductions at any time. And also remember that the number of exemptions you claim on your W-4 does not necessarily have to be the number of dependents you actually claim. You can claim up to 10 on your W-4 before the IRS might question you.

If you have large itemized deductions regularly, such as a huge mortgage with interest and property taxes, or you make a lot of contributions or itemize your business expenses, you may wish to claim more exemptions on your W-4 than you actually have, to lower your weekly withholding. I always advise that it is better to have that extra money each week than to wait for a huge refund.

I got a settlement from my insurance company for an accident. I’ve been told that there’s no federal tax on the settlement. I live in MD, do I pay state taxes? The settlement is for uninsured motorist coverage, if that makes a difference.

Moon Toadie

Dear Toadie:

I am glad you are ok. Yes, Maryland does have a state income tax, as you are probably aware. In general, most states follow the federal rules for taxable or non-taxable income. I could not find specifics on taxable insurance claims on the Maryland website, but I would say your settlement is probably not taxable income. You can get more information from them directly at taxhelp@comp.state.md.us. Include your name, address and the last four digits of your Social Security number, or call them at 1-800-MD-TAXES.

Please remember that you get the advice that you pay for. Information provided by Tax Dad is a starting point, and not intended as a substitute for consulting your own real, live tax preparer or cat.

Have a question for Tax Dad about your federal or state tax returns? We’ll run at least one more Tax Dad column before the end of the month. Send it to us at tips@consumerist.com with “ASK TAX DAD” in the subject line.

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