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Fair point, except the TAX LAW does not support the IRS position. Any educated analysis of the tax law will show that there is no basis in tax law for the IRS to exempt these payments from taxation. And I have bills to pay. I need to prepare returns. I can't wait for an inept government entity to get off their @ss and do their job. Tom Longview, TX

While you don't have to file the 1041, if there are probate and legal fees that are substantially more than the income and can benefit the beneficiary, go ahead and file.

A client's wife inherited a house which she and husband lived in for a number of years. They then bought another house and basically let family use the inherited one for a number of years. Last year she sold it and since the couple has not lived there in eight to ten years it cannot be sold as their residence. I will show it as an inherited house using the basis as of the date of her father's death and add any improvements made by them since he passed on. This seems correct to me but as usual any input is appreciated.

Has it ever been that a state tax refund was taxable unless a federal benefit was received from over-paying? Less than 9.5% of returns itemize deductions after the higher standard amount. I'm guessing a good chuck of the 9.5% was limited by 10K total. So, the only ones that it would be taxable to are the middle class that itemize but don't have 10K in state taxes.

Thank you for the replies. On this estate, previous returns have been filed and this will be the final return. The executor wants to file the tax return and mark it final as to avoid any future problems. There is only one item of income to be received and little to no expenses, as this estate has been open for a few years. When marking the return as final, the income becomes distributable via a K-1 and the sole beneficiary/executor will pay tax on the income. Prepared a few 1041’s, in the past but all have been over $600, never had one under $600 in the final year. This estate is under the minimum threshold to file, but it’s the final year and a distribution of cash will be made to the sole beneficiary. The $600 threshold is tripping me up. If TP wants to file a final return, is the income fully taxable to the beneficiary via K-1 as the estate is terminating regardless of the $600 threshold or do you override the return inserting the $600 exemption even though the exemption is not allowed in the final year, but the return is under the $600 threshold (have not come across any examples that this is allowed) or is there another way to finalize that I am missing?

As long as each parent could have claimed child (their biological child) if they filed MFS the CTC can be allocated any way they want. IMO it's the clients call, not yours. Vast majority of time they will choose option to get most cash rather than pay debt. Do not allocate EIC, IRS will calculate that.

It's been known almost from day one that the irs was going to issue guidance on these refunds. Why would you file returns which include uncertainties when you know the uncertainty would be resolved in a week or two? Then when the uncertainty is resolved in the manner opposite of the way you gambled, you complain about it.

Excess deductions on termination. The 2020 Treasury reg. made that possible after TCJA took it out. There is an allocation process to follow.

Sorry Sara, I think they bailed on their responsibility to collect taxes. Congress makes tax law, and Congress said all income is taxable unless Congress says it isn't. The Nine Clowns in Black Gowns (otherwise known as the Supreme Court) have affirmed that ascension to wealth is income unless Congress exempts it. Congress did not exempt the income because a plain reading of the General Welfare Exclusion tax rules provide that you must show need in order for the claim to be made. Governors from states that did not want their constituents driving to the polls pissed about inflation does not fit the definition of need. The payments made by the state of CA under the name "Middle Class Tax Refund" do not meet the legal definition of a tax refund (it was not based on taxes paid) or General Welfare (recipients did not have to show need in order to qualify as required under statute). Just because the states made the IRS job hard does not give them the right to just throw in the towel and say we are not going to do our job. And they will get away with it because it is like complaining that the highway patrol is not stopping speeders.

So we need to amend the returns we already filed? I cannot believe the IRS just threw tax law out the window "in the interest of sound tax administration". I want to rant so badly right now, but @jklcpaJudy will kick me off the platform if I do. Tom Longview, TX

That's how I would do it.

If they are repairs in nature, they could be considered start up costs. If capital, then depreciation starts when the business is operating.

Working on an S Corp. all day. First one of the year. The last thing I need to do is enter the shareholder distributions. I cannot for the life of me find the entry screen. I pulled a huge brain cramp for about 20 minutes. Then I found it and felt stupid. Happy Tax Season everyone! Tom Longview, TX

You have to open the return and use the E-file menu to Display Rejection Errors, even though it wasn't rejected. ATX needs to rethink this mess. Alternately, in E-file Manager, select the return and press Ctrl+R.

And that makes messages useless because we'll all stop looking at them. 'Accepted' is really the only part I care about.