Ask Me Help Desk - About 1099 for a 1st tune tax filer

Hi, I'm really new to filing taxes (considering that I've never filed taxes before). I did get paid in the past from my school's work study, but they have been deducting taxes on each check so I don't think I owe the government anything. Plus I've never filed for a return... yeah I really don't know anything about taxes...

So recently, I started working from Jan 3, 2008 and I'm growing concerned about how I need to be paying my taxes. So first of all, do I need to be filing my taxes for this upcoming April if I only started work recently?

Also, it seems like this company is paying me with 1099, does this mean I can try to write off stuff as much as I possibly can to make up for high taxes I need to pay? If so, what are the necessary receipts I should keep from now on (Do I need receipts for my lunch, transportation, etc.)? Also, what is the rough figure on 5k a month 1099 check that I should be withholding every month if I am working in NY but I reside in NJ?

I understand it might be a lot easier to just go to a CPA, but would it be worth paying them to find all the deductions I can get or try to do this on my own?

PS- I don't work for a tech firm, I actually work for a real estate developer, so will this change the deductible items significantly?

Thank you for reading all this despite its tedious nature, and I hope your day is already great or will be better. (1 more day till friday~ )

First, you do NOT need to hire a CPA for your upcoming tax year.

Even if you file a Schedule C and Schedule SE for 2008 to properly document your 1099 income, using a CPA to do your return would be the equivalent of using a brain surgeon to take out your appendix. The brain surgeon could do it, no problem, but he would charge you his brain surgery fee for doing it, whereas a 2nd year resident could do the appendectomy just as well and charge you one-tenth of the fee.

Go interview a local independent tax professional for the job. He/she will be able to guide you through the process advice you what to put aside for your taxes next year, then prepare your return for 2008, all for a fee that is probably less than $500.

Now, as for the past year returns, you may or may not have had a legal requirement to file, but you probably should have filed to get the withheld income taxes back. It is too late to get a refund for tax year 2003 and earlier, but you can still file for 2004, 2005 and 2006 and get your money back.

If you do not have the W-2s from those years, call the IRS (you can get the 1-800 number from Internal Revenue Service) and ask them to mail you the TAX SCRIPT for 2004, 2005 and 2006. It will take about 10 days to get it in the mail, and it is provided for FREE.

Then take that tax script with you when you go looking for the local tax pro to hire. Have him/her review the script. He/she can tell you what years to file and what years to ignore.

Quote:

Originally Posted by AtlantaTaxExpert

First, you do NOT need to hire a CPA for your upcoming tax year.

Even if you file a Schedule C and Schedule SE for 2008 to properly document your 1099 income, using a CPA to do your return would be the equivalent of using a brain surgeon to take out your appendix. The brain surgeon could do it, no problem, but he would charge you his brain surgery fee for doing it, whereas a 2nd year resident could do the appendectomy just as well and charge you one-tenth of the fee.

Go interview a local independent tax professional for the job. He/she will be able to guide you through the process advice you what to put aside for your taxes next year, then prepare your return for 2008, all for a fee that is probably less than $500.

Now, as for the past year returns, you may or may not have had a legal requirement to file, but you probably should have filed to get the withheld income taxes back. It is too late to get a refund for tax year 2003 and earlier, but you can still file for 2004, 2005 and 2006 and get your money back.

If you do not have the W-2s from those years, call the IRS (you can get the 1-800 number from Internal Revenue Service) and ask them to mail you the TAX SCRIPT for 2004, 2005 and 2006. It will take about 10 days to get it in the mail, and it is provided for FREE.

Then take that tax script with you when you go looking for the local tax pro to hire. Have him/her review the script. He/she can tell you what years to file and what years to ignore.

Thank you atlantataxexpert for your prompt answer, I really appreciate your valuable advice.
But to confirm and sum up what needs to be done, could you please clarify what you mean by not hiring CPA for the upcoming year? So does this mean:

1) I do not have to hire a cpa because he's too expensive to do a simple job but I should still pay taxes that I earned in '08?

2) I do not have to hire cpa because he's too expensive to do a simple job and I won't be paying taxes for what I earned in '08, but instead pay those taxes in April '09?

I am just confused because when people file taxes by the April of every year, doesn't that mean they file what they earned from, let's say, April of '07 to April '08? If so, I can file for a return from what I earned in work study up to December 07, and I would still have to pay taxes from my income starting January '08 to April '08, no?

If this is not the case, do people just file taxes from what they earned starting January '07 to December '07 and that is the reason why I don't have to pay taxes for this upcoming filing period?

In addition, I was assuming CPAs are the same as, or like a local tax professional, but I feel like I made the wrong assumption. Regardless, are you suggesting that I go to LTP to file a return from 2004 to present after I have the tax scripts, and also ask them about deductions that I can make for filing taxes in the future?

Sorry for bombarding you with questions, but I felt that this site is a great place for asking questions and finding quick, reliable answers for what I'm looking for. So thank you so much for your time, and your much appreciated patience.

1) I WANT you to get professional tax help! I just do not want you to use a CPA for what is probably a rather simple return. Your local tax preparer can probably do the job just fine, and will not charge your NEARLY as much as a CPA. You WILL have to file quarterly estimated taxes in 2008, with the first tax return due on 15 April 2008. The tax pro will know what to do.

2) After all the quarterly estimated tax returns are paid, an ANNUAL tax return is prepared to reconcile what you earned and what your final tax bill will be. For 99% of the U.S. population, the tax year starts on 1 January and end on 31 December.

Okay, you obviously do not know about the various levels of tax professionals.

At the top are Certified Public Accountants (CPAs) and tax attorneys. They can do it all, and the charge BIG BUCKS to do it.

Next level down are enrolled agents (EAs), who are tax specialists who are licensed by the IRS to represent taxpayers before IRS audits. An EA can do virtually any tax return there is, so they charge a hefty fee, though NOT as much as a CPA.

Next level down is your local tax professional/tax preparer. Here, you have to be careful, because, at this time, there is NO licensing requirement for the local tax preparer. Many of these local independent tax professionals are skilled professionals who know a LOT about how to do taxes. Unfortunately, many know very LITTLE about taxes and are effectively just data entry clerks for the tax software they use.

It has been my experience that someone who runs his own tax business is more likely to be the skilled tax professional. The people who work at H&R Block, Jackson Hewitt, Liberty Tax, and other franchise location have had various degrees of training. Some are real pros, but MANY are the data clerk variety of person.

Quote:

Originally Posted by AtlantaTaxExpert

1) I WANT you to get professional tax help! I just do not want you to use a CPA for what is probably a rather simple return. Your local tax preparer can probably do the job just fine, and will not charge your NEARLY as much as a CPA. You WILL have to file quarterly estimated taxes in 2008, with the first tax return due on 15 April 2008. The tax pro will know what to do.

2) After all the quarterly estimated tax returns are paid, an ANNUAL tax return is prepared to reconcile what you earned and what your final tax bill will be. For 99% of the U.S. population, the tax year starts on 1 January and end on 31 December.

Okay, you obviously do not know about the various levels of tax professionals.

At the top are Certified Public Accountants (CPAs) and tax attorneys. They can do it all, and the charge BIG BUCKS to do it.

Next level down are enrolled agents (EAs), who are tax specialists who are licensed by the IRS to represent taxpayers before IRS audits. An EA can do virtually any tax return there is, so they charge a hefty fee, though NOT as much as a CPA.

Next level down is your local tax professional/tax preparer. Here, you have to be careful, because, at this time, there is NO licensing requirement for the local tax preparer. Many of these local independent tax professionals are skilled professionals who know a LOT about how to do taxes. Unfortunately, many know very LITTLE about taxes and are effectively just data entry clerks for the tax software they use.

It has been my experience that someone who runs his own tax business is more likely to be the skilled tax professional. The people who work at H&R Block, Jackson Hewitt, Liberty Tax, and other franchise location have had various degrees of training. Some are real pros, but MANY are the data clerk variety of person.

Ah, thank you so much for clearing that up! I think I have a better idea of what needs to be done now. Once again, thank you for your time and effort for helping out a student like myself, transitioning into the real world.