Leaderboard

You would think. They're supposed to report what was paid now. Not what was billed, which didn't help us at all. But PAID seems to have different definitions to different colleges. Some report net pay after loans and scholarships, some subtract some things but not others, some cross year-end to report the semester/school year it applies to and not the calendar/tax year. You need the bursar's statement with dates and amounts and sources and often the parents/students adding up what they paid via check/etc. I expected better from institutions of higher learning.

Don't try to match up the 1098-T with anything, because they are often wrong. Use the bursar's statement for amounts. You need the 1098-T to document college enrollment and Box 8 "At least half-time student (if checked)."

I have way too much experience with this problem. Thank to the All Mighty that all of these clients have sold their businesses, retired or are no longer clients

It is a distribution. Tell them to stop being lazy and simply transfer the funds to their personal account. Warn them of the legal and tax implications, plus all the extra bookkeeping to enter all those personal disbursements. Then have a separate conversation about reasonable compensation. Document your conversations in your notes or a letter. If they don't stop, consider firing them.

STOP DOING THAT !! I use Distributions. And, educate the client. I've used Loan to Shareholder if basis is a problem, but want it under $10,000 and going down each year. Fire him.

I had errors in Drake the way I was answering the questions too. What I found out is that "C" must be checked, "No" to a will, the next 2 questions checked as "No", and "will distribution marked as "Yes". Then, the name shown as "in care of" must match the name on the 1310 of the person claiming the refund. The "in c/o" name may be your problem with it showing a mismatch error. iirc, I didn't attach anything and I was able to efile the return.

This came from Drake, but it seems that Microsoft has pulled the update because of other software being affected.

So sorry for your loss Rita and family. You’ve been a good daughter and great comfort to Mom.

I would deduct it due to both interest tracing rules and the fact that it is secured by a qualified home.

Please don't confuse home equity loan, HELOC (those are bank products), or second mortgage with deductibility. If the use of home equity loan or HELOC proceeds qualify as home acquisition indebtedness or home equity indebtedness as defined by the tax code, then the interest would be deductible within the limits allowed. Where home equity or HELOC interest isn't deductible (through 2026) is where the proceeds are used for something other than to buy, build, improve. So, for example, interest on a HELOC used to purchase a new car would NOT be deductible under the current law, but interest on a HELOC used to renovate a kitchen or build an addition would be.

Tom, thank you! That section has been updated since I quoted from it earlier in this post and another post! That's why we should wait for the final version to be signed into law and discuss pending legislation with caveats.

@jklcpa Thanks. Here is the answer (formatting is mine): “(c) Special Rule For 2020.— “(1) IN GENERAL.—In the case of any taxable year beginning in 2020, if the adjusted gross income of the taxpayer for such taxable year is less than $150,000, the gross income of such taxpayer shall not include so much of the unemployment compensation received by such taxpayer (or, in the case of a joint return, received by each spouse) as does not exceed $10,200. “(2) APPLICATION.—For purposes of paragraph (1), the adjusted gross income of the taxpayer shall be determined— “(A) after application of sections 86, 135, 137, 219, 221, 222, and 469, and “(B) without regard to this section.”. Tom Modesto, CA

I think it's deductible, with some of it subject to home equity indebtedness limits. Consider the following: It can't all be "acquisition indebtedness" because that does require that the loan be used to "buy, build, improve" the qualified residence securing the loan, Sec 163(h)(3)(B)(i)(II) however, It would fall under the definition of "home equity indebtedness" though, subject to those rules and limitations, because it was used to buy, build, improve a qualified residence of the taxpayer. Sec 163(h)(3)(C). Qualified residence is defined in 163(h)(4) and includes the principal residence and one other selected by the taxpayer for the year. I think it works like this: If there was an existing mortgage on the principal residence that was refinanced, the amount of the new loan up to that amount would be considered as grandfathered in as acquisition indebtedness, and then only the excess above that that was used for the second home would be considered home equity indebtedness. 163(h)(3)(F)(i)(III) and 163(h)(3)(F)(iii)(I) https://www.law.cornell.edu/uscode/text/26/163 Hope I got all the code references right!

Stick with your strengths, @Abby Normal !

I'll see what I can do, probably tomorrow. Need the daylight coming in the window to get a good picture.

I'm split between Lion and Possi. I'd give them a bill with their original documents, and not sweat it if they don't pay. But, if they don't pay it, I won't take them back. If they come crawling back, they have to pay the unpaid bill, and pre-pay my guess for the current year, before I'll accept new documents.

Rita, my deepest sympathies about your mom. Many, maybe most, of the hospice people are really superb and hope that is the case for your mom as well. I heard nothing but wonderful things from the wife of a client who just passed from cancer, about the hospice people. Went to the wake just last week. At least with hospice at home, there's no restriction on visiting, either. Don't know what the TN rules are at the moment but around here folks are way better off going home to pass, where their loved ones can come without strict limitations.

I've seen plenty of Bursar's Offices do things that, if done by a for-profit business, would be malfeasance at least and fraud very likely. Don't trust any of 'em as far as I can spit.

Treasury has long advocated this technique: https://www.treasury.gov/connect/blog/Pages/Helping-students-and-families-access-college-tax-benefits.aspx I use it all the time. You do have to insure the scholarship is unrestricted (Pell grants are always unrestricted). And if the amount of the scholarship is more than the qualified expenses, it almost has to be unrestricted, doesn't it?

My understanding is that even if the scholarship is used for tuition, if it's not REQUIRED to be used for tuition, you can essentially 'assign' it to other nonqualified expenses (room and board, etc.) and use the amounts paid by the taxpayer as the payment for qualified expenses. I have the bursar's statement, but I also needed the scholarship lingo to make certain they weren't 'tuition only' scholarships. I know it's a lot of work, but in this case, it's worth $2,500 to the taxpayer. (If my understanding is correct, that is. If not, I'm wasting my time and yours, and for that, I apologize.) I'm leaning toward filing this way; It just seems to good to be true, so I wanted to see what others thought. I appreciate all of your input!

Always get the bursar's statement. Forms 1098-T are notoriously inaccurate. (I don't know what that says about the colleges teaching our next generation.)

I was hoping to choose between TaxDome and Taxaroo before this season got underway but never managed to. So now it will be on my to do list for after this season's filing deadline. If the finish line gets moved, I may be able to look into these sooner. Thanks GGRNY for sharing your experience!

I am so sorry to hear of Rita's loss. Tax season is stressful enough without the added stress of losing a loved one. Please convey my deepest sympathy to Rita.

Thank you for the update, Possi. @RitaB, I am so very sorry for your loss and will definitely have you and your family in my prayers.

@BulldogTom Here is the direct link to Congress.gov for the entire House bill that went back to the Senate. Look for Title IX, part 4. The unemployment provision is in sec 9042. That entire section is very short, and unless there is some technical correction or somewhere else that references back to the Cares Act and that threshold that I'm not seeing, right now I don't think it's an add-back, but that doesn't mean I'm right or that it won't be in future. I suppose it's possible, just like the n/t portion of social security is an adjustment to arrive at MAGI for the PTC calcs. Sorry I don't have anything more than that at this time, and don't have time to take a course at the moment, and luckily so far I haven't seen anyone close to the limitation like your client's situation. https://www.congress.gov/bill/117th-congress/house-bill/1319/text If you don't want to click the link, google "H.R. 1319" and look for the ones that go to Congress.gov site. That is the official site for the House, and the official site for the U.S. Senate is Senate.gov.

Yes, and if they had earned income in 2019, they could also qualify for EIC.

Those under 25 can get EIC if they have a child and meet the other tests. The 25 to 65 rule is for those that don't have a child but meet the other requirements.

And yes this is possible to do. I was out on my own, working full time while going to school full time, starting senior year of high school. Graduated, and got through MIT - and used up my lifetime supply of all-nighters in so doing. NOT recommended. But definitely possible. Doing that with a wee one too... ugh. She has my sympathy!

Same problems as the ones I ran from in early February 2013.

Everything Lion said. He needs to file FinCen 114 (formerly FBAR) and possibly 8938. Always file, in these cases, to get the SOL going. That said, as long as the IRS has a routing number and account number, they'll take it. It's one reason WE have to be so frimping careful putting those numbers in; if we put in the wrong account, the funds WILL go to the wrong account. Without a US account, with US routing (ABA) and account numbers, the US person will be mailed a check. That's a problem with mail outside the US and also a problem with many banks in Europe now REFUSING to take checks! I have two clients who live in the Czech Republic (dual citizens) who had to open accounts at the ONE bank left in Prague that will still accept physical checks. And since all the banks over there don't have US number, they are not eligible for direct deposit from the US. They have relatives here who may be able to help if something crops up in the future - but frankly, would any of us be sanguine about sending *our* over-$1,000 to a distant relative's account in the hopes they send it to us?

Since it's a 1095-A, you have to subtract the premium tax credit to arrive at the amount paid for health insurance. You can't just use column A.

Yes, as long as it is not scholarship and grants, no matter who pay or get the loans... the credit follows the exemption of the student.

For a young kid who hasn't filed yet, I don't push to have him file when he/she has no filing requirement. Once a child has filed, I do push for him/her to NOT miss a year.

I always suggest filing to start the statute of limitations running. Does he need to file Form 8938? Is he required to check the boxes on Schedule B, or only if he has a filing requirement? Is he e-filing his own FinCEN Form 114?

No, the IRS doesn't track your carryovers from year to year, even though they probably should. Prepare the return so you have the rollover for next year, just don't bother filing it... unless you're concerned about the SOL.

I had my clients reach out to the financial aid office at the school. I got the language of the scholarships.

Right, it's supposed to be a one-line adjustment, but if it had been done correctly from the outset those entries would be on the 4562. In this case I might be inclined to enter the assets there with all of the pertinent data, date, depreciable basis and accum depreciation through 2019 with the labels something like "rental house-481(a)" and let the system handle the disposition correctly. That might get you to the correct result anyway, I think. If there is some other component of the 481(a) adjustment because of owner's use in previous years that limited other expenses creating a carryover that the program isn't handling correctly and there aren't many years involved, you could enter it in the original year and roll the Sch E and 4562 forward through each year's program. Maybe that would work?

YES, this.

I am filing as laws have been written regardless of what will happen. It is not my fault that Congress will change them retroactively. I guess Congress gave me a chance to create demand for my services and file those with unemployment benefits as soon as they hit my desk. lol. For sure we will have to amend a lot of returns but I don't have a crystal ball to see what will happen and I am filing as clients are coming in.

Amendments will have to happen after tax season. I've already done a ton.

Give them a bill. But if they don't pay it, don't fret. Give them back the documents they gave you and wish them well. You don't want clients who are shopping for the best outcome without planning with you before the year ends to improve their own outcome.

If you see a member sharing private information such as EFIN or client data, either in a post or screenshot, please use the "report" function and I will remove the private data and try to leave the rest of the post intact as much as possible. The forum sends me an email immediately with every reported item, but if you try to get the poster's attention in a followup post, in all likelihood the person will not see that before the 5-min editing window has lapsed. Thx.

Yes, probably was something to due with the SS worksheet error in calculating taxable amount. If you already had the 8879 signed, keep in mind that you don't have to redo that if the change in tax < $50.

Thanks for the post, Judy. And thanks also for attempting to scrub the information. Moderator Extraordinaire!!

yes, as long as she is not a qualified child of another tax payer. If she is not a qualified child, she will get: EIC, additional child tax credit, Stimulus of 500 and 600 for the child, if she was a dependent in 2019, she will get stimulus for her too which will be $1,200 and $600 AND she will get up to $1000 refundable AOC. She will get more money from the IRS and state(s) than the net she received from her job.

He's only 27?! Rockin' that cradle!

It took me two tries! He's a great guy. 27 years this June. So, yes, I'm very happy and try to smile and thank him when he waters my plants. Plus, it's easy to smile and thank him when he keeps me supplied in chocolates.

I provide a SASE with an identifying code only I know above the return address. I use Catherine's method, but also tape the envelope (w/postmark) to the back of the form. Again, I use Catherine's method, but also make the client initial the old date with the current date. Overkill maybe, but I'll be damned if they'll (IRS) penalize me after NOT paying me to do most of their work!

Oh I need a picture of that!