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It is a full year calculation. This is one of the pitfalls (critical oversights/flaws/stupid law crap) of the ACA. You have to estimate your future income, and the penalty for not knowing the future at the time you sign up can be financially devastating to the taxpayer. I am not being critical of the politics, just the actual law as it is written. It is unfair to the TP to make their estimate of income the determining factor in the amount of a tax credit that will need to be repaid if the estimate is incorrect. Getting off my soapbox now. Tom Modesto, CA

IT's a Trap! Don't do IT!

First check the actual financial transcripts from the college to see what was actually paid when and when the scholarship was applied. In many cases the timing of the scholarships and tuition do not coincide with the 1098-T. If the records show that, in fact, the scholarship exceeds qualified tuition, then it is reported on the Child's return. It goes on line 7. The standard deduction will take care of most of it. For $8,000+ there will be some taxable. at 10% tax- not bad for "free money"

So do we post our tax kook of the week nomination here? I had a client this week that I still have a headache from! Think of everything he said as being in a Gomer Pyle voice, because that's what it was. Last year, he came to me for a second look at his return because "there is no way she prepared it right last year. She didn't know what she was doing. Look at that high amount on that form (his Social Security statement). That high amount should've gotten me thousands of dollars in refunds." I had to explain to him that receiving Social Security did not actually amount to a large refund. If no money was withheld, there would be no refund from that. I also had to explain that last year's preparer did, in fact, prepare his return correctly. He argued with me for quite awhile - I had to chat my husband to come in and rescue me. I dreaded my appointment with him this year from the moment I saw it appear on my calendar. This year was worse! He insisted on claiming his daughter because it was his right to claim her because she was his daughter. No SSN. No support paid to the mother, and she did not live with him. I told him that I would need a signed form from the mother allowing him to claim him or a court order that gave him permission to claim her. Aside from that, I could not put her on his return. He told me he didn't care what the IRS or the courts said, he should get to claim her because she's his daughter. (Remember Gomer Pyle voice) Then he freaked out because "every tax form is required to have a dollar amount on it (?) and that form there (insurance documentation) doesn't have a dollar amount on it. While I don't think the dollar amount on it should be as high as a thousand, it should have at least $500 on it." He had to get additional documentation to me to finish his return, and I finished it last night. I knew I should've just sent him on his way with his documentation on Sunday, but I thought maybe I could talk some sense into the guy. He came in to pick it up today and refused to pay the measly $60 I charged him "because you must've prepared it wrong. You don't know what you're doing. You're scamming me out of my money. You wouldn't let me claim my daughter. That paper I brought in from the mobile home park (lot rent) had a lot of money on it, and I should be getting at least $1000. And $60 is too high. A normal tax return is only $25." Guess my nine plus years of preparing returns does not qualify me to prepare a simple property tax credit in Michigan. I can't believe I could only get him around $300 when he got all that FREE Social Security money! I did invite him to pick up his documentation and take it to the place that would only charge him $25 and would know how to prepare his return. I just hope all the paper they give him has dollar amounts on it! Have a great night, everyone!

I'm wondering, too. If the numbers on the 1098-T pan out (they probably will not, in my experience), and the excess is $8603, there would be no credit.

I’ve told my couple of PMI clients early March. If I file before then I’ll be a hero.

Start your research with Pension Protection Act of 2006 and IRS Notice 2007-50. There are volumes of Tax Court cases regarding conservation easement contributions which ultimately, per the Tax Court rulings, failed. Lots of rules to be followed to be successful.

Vote here for @RitaB as I am nominating her for a star because of her announcement last Friday in the "ATX client letters" topic that she is willing to play host to a bunch of you this coming June 23rd. Rita, you are a treasure, always willing to help and always with good humor.

I've posted this before but for any new comers this is a good reference to use. https://www.treasury.gov/resource-center/tax-policy/Documents/Report-Pell-AOTC-Interaction-2014.pdf

I want to get a picture of Rita on her backhoe...

Just had one of these situations. Had to go back to the prior year and current year disbursement records. Stanford still reports the 1098T on the school year quarterly system, but the disbursement records are very clear. Agree with this. The excess scholarship goes to the child. Any tax credits go to the return where the dependent resides. Tom Modesto, CA

The excess scholarship is shown as income on the child's tax return.

I hate when that happens. Thanks

The house must have been in the estate but was eventually re-titled to the beneficiaries as they are the ones who apparently owned it when it was sold (they are the ones who got the 1099S forms). If the estate had no income in 2017 and no expenses, no 1041 is needed. The depreciation "allowed or allowable" is the estate's problem but I wouldn't do anything about it at this point. With depreciation, the estate would have had lower income and now the heirs will have higher income = a wash (except theirs is cap gains income, while the estate might have had ordinary gain/loss, but the IRS is getting paid one way or another). The 2016 $300 loss could have passed through to the beneficiaries if the estate return was marked "final." It might be too late now, but cap gains tax of 15% on each person's share of the loss = $15 (or $24 if they are high income) and isn't worth fretting over. Handle the sale on the individual returns. The heirs got the 1099S forms and the IRS computers will be looking for that $100k on their 1040s. Your basis calcs are correct, but add any expenses of the sale (realtor, title transfer, attorney, etc.). You can file a 1041 if the estate had expenses in 2017, e.g., the cost of transferring the title to the heirs as well as your tax prep fee for that return--yes, you can deduct it even if not yet paid. Then you can mark it as final. With three beneficiary packages, I would charge at least $750 for the 1041. Whatever you charge, make sure it is divisible by three so each can pay the same amount.

You are killing me with that sad face, @BulldogTom. I can't wait to feed you some BBQ and give you a hug.

Cha CHING! Getting paid for amendments is good for me. I hate amendments. I love money. I'm so torn... TORN, I tell ya.

AHHHHHH THANKS! I'm sorry... it's an S Corp, not a partnership. I knew that. I just wrote it wrong. So, I am right to adjust the SEHI, but not the SIMPLE. Whew.

Decide on a study guide. Map out a study plan. Schedule a test. If you are a facebook user, we have a group where we ask and answer questions and generally help each other understand some topics better that we don’t have a lot of experience with. I was scared too. I had been doing taxes 38 years when I decided I just wanted to prove to myself that I could do it. I also wanted my daughter to do it so I needed to set the example for her. Best of luck to you. PS - I used Passkey book, study guide and online subscription. I was very happy with them.

In the same place where you turn off those annoying blue triangles that pop up tons of unwanted information every time you mouse over them.

I am talking about adding back the scholarship or pell grant income, which exceeds the tuition amount at least as it is reported on the 1098-T, so that the AOTC can be claimed. Your OP discusses parents taking the AOTC.

Are you adding the scholarship income back in to the parents' income so you can claim the AOTC? I'm not sure I'm following your post.

Look at your Preferences, I think is where I found a check box in the program to allow or not allow pop - ups in the program. First time I saw it was for the 2017 returns. It's there (box to check)...hope you find it.

Mine is not wacky, just annoying to me. HOH with a full time job that pays around$ 88K and also earns $40K through direct sales. One of her friends sells the same stuff with probably $200K in sales and a couple of other self employed businesses. He says that he and his wife don't pay any taxes, because they write off everything. She wanted to know what I was missing. I explained that we are using every legit write-off possible and that I have been for years and that next year there will be a new business deduction that will help decrease income tax only. I told her that if were legal to write EVERYTHING off, that I'm pretty sure that no one would pay any taxes. I hope that he was just blowing smoke up her rear or that he gets caught some day. She is pretty sure that he prepares his own taxes. Go figure!

I am wanting to do this after tax season this year, I think. We could challenge/encourage each other through the process if you'd like. I've already learned a lot just by reading posts on the Facebook group I'm in now.

Stay away from giving advice on this one. The client needs an attorney. The IRS is aware that this is a loophole and contests these transfers all the time (and wins).

Damn. ATX made me eat my words. Had the forms ready the same day for at least some of the extenders.

just downloaded updated forms did not look for all of them but you can now enter PMI

Exemption from SS and MC is not required but is an option for ministers. They must meet 6 requirements and file timely Form 4361. It is quite possible this minister either does not qualify and/or failed to timely file the exemption certificate which certifies "I am conscientiously opposed to, or becausse of my religious principles I am opposed to, the acceptance ...of any public insurance..."

That sounds right.

There were a few improvements prior to 2001 and I have included those in mom's basis. I was able to pull detailed property value information from our county auditor...that was helpful as they track any improvements as a reason to increase value (and property taxes).

That actually works also and gets tax deferred (or free) growth. The problem is the kid has to own it since it's their money to begin with so it doesn't eliminate the risk that the child would blow it all when they are 16. With a minor trust, the trustee would have to agree to any withdrawals until turning a set age. This kid could easily have $200k in their fund when they turn 16, not a lot of teenagers could avoid the temptation.

JB, if the house was held as joint tenants, not community property, then I basically agree with what you have written that I quoted below. Remember that basis of the gift will be donor's basis plus any additional improvements, but would be FMV at time of the gift + improvements if its disposition results in a loss (obviously not the case here since its current value has continued to increase): I also agree with Lion that there could be additional basis in each of the holding periods: mom & dad may have made improvements after its purchase in 1978 and before dad's death in 2001 where mom would share in 1/2 of those expenditures, mom alone may have made additional improvements between 2001 and the transfer to 3 son's, and there could be additional basis if the son's did anything to the house beyond ordinary repairs and upkeep.

If its really what you want then by all means go for it. I assume you will regret it if you dont. When I was studying for the CPA I took a review class and the best advice I got was. "Remember, the test was written by individuals and is designed for individuals. Many have passed so dont look at it like its impossible. If you want to do it, and you prepare sufficiently, you can do it!" And I did on my very first attempt. Its a great feeling!

Not seeing that here, but to be honest with you, nothing would surprise me if that is happening to some but not others.

Too many warm corona's??? Tom Modesto, CA

I would recommend a Code Section 529 plan for her.

You are the favorite person on this board. And Judy had to nominate you for the star of the week. I think it is a conspiracy to keep me from my star, so I am crying..... Right now, it looks positive for us to get out to see you, so long as there is some business purpose (Abby Class on ATX customization?). I love me some BBQ, and I could use a hug.... Tom Modesto, CA

NONVOTING POST - Look, I took a selfie : Aww, Tom, sorry. I've been waiting to see if anyone else would nominate someone or make more posts. You're all stars in my book.

I'm assuming this is the Survivor Benefit Plan? If so the kid gets the benefit until turning 22 unless she gets married or quits school and then it stops. For the savings account, I hope they get the funds into a minor trust account.

Well, Aunt didn't *have to adopt her. She was awarded her niece in court, and I have a copy of the papers.

HMMMMM..... Aunt isn't treated as a living parent? I thought she was since she has legal custody. I need to re-think this if so. Aunt is providing over half the support, and is saving much of the money. Not sure how much, but there's plenty of interest income derived from the savings account.

YW... I just did one a few days ago for a little girl with pension on a 1099R... this can be a very unfair tax.

Ah, so Kiddie Tax return is not done in this case, and niece may NOT have investments. Thank you. Nice catches.

The p Double check... One of the filing requirements is "At least one of the parents have to be alive at the end of 2017." Also, Rita, distributions on a 1099-R count as "unearned" income for the Kiddie tax.

Well, yes, thank you, Max, it's much less than that. (49,000)(0.0765) = 3,749 (49,000)(0.9235)(0.153) = 6,923 6,923 - 3,749 = 3,174 Then you deduct (0.5)(6,923)= 3,462 for income tax purposes. At 15%, that saves 519. So now we're down to 3,174 - 519 = 2,655. Of course the client only sees the $11,000 and thinks that's ALL due to the boss not wanting to pay payroll taxes. When you boil it all down, if people would make estimated tax payments, they'd feel better.

You can do this! I am giving advice on how because I took it back when it was paper and so I don't know that what I observed still holds true. But I have confidence in you!

Tell your client to get that child the Social Security Survivor Benefit as well. Aunt may not be able to claim the child, as she is NOT providing more than half of her support. $20K? Is Aunt paying $20,001 for her care? Rich

Decide how you learn best. The study guides available are great, with lots of practice tests. There are also live courses online, such as Eva Rosenberg/Tax Mama. And, you might have live courses near you. HRB's course was great years ago when I took it, but I don't know if you have to be an employee to enroll. Check with your local chapters of NAEA and NATP to see if they offer courses. The nice things about the current test is that you can take one part at a time, know if you passed immediately, and retake if needed as soon as you want. Basis, basis, basis. If you're finding a weakness as you study, pull the corresponding IRS Pubs; you'll often find questions on the test come straight from the examples in the Pubs. Don't be afraid to guess, but don't second guess yourself. Breathe!

There is an exception in California. The property has to be titled as 'Joint Tenancy with Right of Survivorship" (JTWROS), to get the full step-up basis. A revocable living trust will do the same thing, at least in CA. Don't know about other states.

Quite possibly: Unfortunately, some persons deed away their homes without reserving a life estate. Arguably, the federal estate tax inclusion ends up being lost by such a maneuver, but the literal language of Section 2036 quoted above can salvage the step-up in basis: note that the word “retained” is used. The Internal Revenue Service has successfully argued in the past that a right can be retained without having been reserved, and that the continued occupancy of the home after the transfer of title, without paying fair market rent, is evidence of an implicit agreement, understanding or assumption of the parties of the transaction. (See Estate of Linderme v. Commissioner, 52 T.C. 305 (1969).)