Ask Tax Dad: Amending My Taxes, Social Security Disability, And Buried In Online Brokerage Paperwork

The wisdom of Tax Dad

The wisdom of Tax Dad

Usually, our staff Certified Tax Cat handles readers’ questions about taxes, but he found a particularly good sunbeam and called in for a personal day. Filling in for him is Laura’s dad, a retired accountant and real live independent tax preparer. Exclusively on Consumerist this spring, Tax Dad answers your questions.

Michael writes:

What is the best way to go about filing an amendment for our taxes. We claimed income off a jointly owned family farm as self employment tax instead of the lower “passive income” schedule. Our tax software did not know where to put it.

Also, I get a 1099 for a company vehicle. Where does that go?

Hi Michael:

Most tax softwares do allow for filing of an amended 1040-X return, and provide the forms, but IRS does not yet allow you to file the 1040-X electronically. Of course if for instance, you are using turbotax, you would first have to complete your return the original way, then do the amendment, for the software to calculate the amended tax.

As for the 1099 for car allowance, this would be treated as additional income. You may also be able to deduct some or all of your auto mileage or expenses to offset this allowance.

Two readers had more or less the same question. Ed asks:

Being disabled or on social sec. Can you file for a tax return?

If on social sec. and paying off loans/mortgages, or home improvements on your own home..
It isnt easy when something goes wrong, and you have to pay for it out of pocket.

ED: Not sure if I understand your question…can you file a tax return, or MUST you file a tax return? As with many questions we receive here, the answer is: that depends.

If Social Security is your only income, then generally you would not have to file a return. You could file. As a general rule, if you have other income, then if 1/2 your social security benefit plus your other income equal less than $25,000, you would not have to file.

If you have earned income, such as with a joint return, you may have to file to obtain a refund of taxes withheld, or you may be eligible for an earned income credit. So, this seems a simple question, but…it depends.

Dear Tax Dad,

I took the advice of a lot of folks and have started an investment account with an online sort of broker. I give them a little money each month and they invest it in the stocks, bonds and EFT’s that I have designated. While I am not getting rich I am earning a little money on these investments.

My question is, how do I report all this on my tax filing this year? There seems to be a lot of forms and stuff I get from the broker thing and I do reinvest all the earnings back into the investments…no net cash.

Jon

Hello Jon:

Though I am not familiar with the “online sort of broker”*, I am sure that all sorts of brokers today are required to provide you with a statement at year-end, summarizing your taxable and non-taxable interest earned, taxable and non-taxable dividends earned, stock purchases, and stock sales, which may result in taxable capital gains or capital losses. Perhaps you need to search online for these reports, which would be in the form of 1099-INT, 1099-DIV, and 1099-B.

And yes, if you are going to continue investing until your money is gone, I suggest you keep a paper copy of your stock purchases and sales…this year-end report should summarize them, as a record for future tax returns.

Over the years, as a tax preparer, I have encountered many cases where a taxpayer sold investments that he had purchased many years before, reinvested dividends each year, then had his broker sell those investments, and neither he nor the broker had any idea whether he had gained or lost money on the sale. My complaint was that the broker, having all the record-keeping equipment, should be required by law to keep a record of a client’s purchase activity, knowing that eventually it must be sold. At the very least, the broker should advise a new client to keep his own file of such activity.

Now, beginning in 2011 (better late than never), our government requires brokers to maintain stock purchase information, and report cost details when the stock is sold. Hopefully, this will ease your burden of reporting this activity come tax time.

So, yes, find that 1099 report, and do detail your gain and loss activity on schedule D of your tax return.

* – Tax Daughter explained what Jon meant to Tax Dad, and he says that his advice still applies and that trading stocks online sounds totally fun.

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? Send it to us at tips@consumerist.com with “ASK TAX DAD” in the subject line.

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