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New line on the client questionnaire: Have you shared a bedroom for greater than 6 months?

If you're old enough to remember the old TV show "Kate & Allie" about two single women with their own kids sharing a house, that could've been two households. maybe. I was taught at Block, if they share the master bedroom, it's ONE household. Do what Lynn said.

If the kids are biological children of both parents as a couple, I'd be suspicious that it's one household. But I think we've all seen a bit of everything. I have two cousins who inherited a house from their grandmother and live there happily ever after. No kids, so don't have to deal with HOH, thank goodness. Split everything 50/50 for decades. Even when they were still working, and the one with higher income would've benefited from a larger percentage of the deductions. They wanted everything 50/50, each year. One always drove them to work and to everyplace for years until her eyesight failed, loving to have a truck and a fast car and a reliable commuter car and a spare car; now the other does all the driving, I think only an SUV. Still vehicle ownership and car tax remain 50/50. The split of deductions no longer matters on their nearly identical retirement incomes and with the higher standard deduction. I've had divorcing clients/divorced clients who couldn't afford a separate house/apartment close enough to kids/schools, jobs, etc., so one moved into the guest room or the finished basement or the mother-in-laws' quarters or the guest house or otherwise divided up the physical house. Separate households. Didn't Fergie and her Prince live together to continue to co-parent for years? We see it all in our biz. But we are required to ask more questions if we're not comfortable that what we're hearing is the full, complete story. Don't let your clients tell you how to file their taxes. It's our job to tell our clients their options or option.

See if both are using the same banking info (assuming direct deposit of refund). If they pay retainer by check, are both names on the check? There may be some non invasive ways to make your determination. Sans some sort of divorce or separation papers, it is likely best to start with "prove you are not one household".

That is true for the dependency calculation. Not true for the refundable AOC calculation - for that, it doesn't matter who actually paid for the support, just that the earned income was more than half of the support costs.

Yes, the student can claim the credit. The exceptions for the refundable portion is below. Of course, this is for the AOC. if you are looking at the Lifetime Learning credit, if the student is not a dependent, they can claim the credit without restrictions. Refundable portion. 40% of the American Opportunity Credit is refundable for most taxpayers. Exception: Taxpayers under age 24 cannot claim any part of the credit as refundable if all three of the following conditions apply. 1) The taxpayer is: • Under age 18 at the end of the tax year, • Age 18 at the end of the tax year with earned income of less than one-half of his or her support, or • A full-time student over age 18 and under age 24 at the end of the tax year with earned income of less than one-half of his or her support, 2) At least one of the taxpayer’s parents was alive at the end of the tax year, and 3) The taxpayer is filing as Single, Head of Household, Qualifying Surviving Spouse, or Married Filing Separately for the tax year.

I deducted a similar $ amount each year my mother-in-law was in a memory care facility for advanced dementia.

See attached link below the requirement is more than one-half of the cost of maintaining the household https://www.irs.gov/faqs/filing-requirements-status-dependents/filing-status Second FAQ: Question: If the parents of a year-old child never married but live together with the child for the tax year, and both contribute to the cost of maintaining the household for the child and themselves, may they both file as head of household? Answer: No, only one parent may claim the child as a qualifying child to file as head of household. To file as head of household you must furnish over one-half of the cost of maintaining the household for you and a qualifying person. Therefore, only one of the parents will have contributed more than one-half of the cost of maintaining the household and be eligible to file as head of household. If a child is a qualifying child of both parents, there is a tiebreaker rule to determine which parent may claim the child. See Publication 501, Dependents, Standard Deduction and Filing Information for more information.

Dividends in whole life policies aren't always paid to policy owners. In your clients case they were left in, and that's why they were available to pay premiums. Besides being paid to owners in cash, dividends can be left in and used to pay premiums, left on deposit that accumulate with interest, or to purchase paid-up additional whole life insurance. If there no paperwork explaining the payout and its components, the client's insurance agent or company should be able to provide the explanation and breakdown. The business clients I've had over the years with whole life-type policies received annual statements that showed the face value, CSV, termination dividends, any outstanding loans, accrued interest on loan, net value, and any potential taxable gain on surrender. Does your client have any statement from a prior year that may provide clues as to how the 1099R amount was determined? Maybe the amount isn't that farfetched. This policy is almost 70 years old, and that's a lot of time to accumulate value that's never been taxed.

It does make sense if you think of a whole life policy's surrender in a different way. When the policy is surrendered and CSV is received, that is a return of premiums and the excess that is being reported as taxable is that which has grown beyond the premium, and that is why it's said that the premiums paid over the life of the policy is considered basis.

As far as the CTC you can go ahead and file. If the bill passes, the IRS will make any adjustments internally and issue any additional refunds due. Very similar to how unemployment compensation was handled several years ago.

I am aware that there are commissions and admin fees included in the cost he paid that are not premiums for insurance and do not increase the cash value of the policy. The thing that has me stumped is this client is pretty meticulous in his recordkeeping, especially for someone 81. He does not have any records of anything coming back to him as dividends. He remembers they sent him a letter telling him he did not need to make payments anymore, but he says he never got a dividend check. As soon as he decides to cash out the surrender value of the policy is nearly equal to the face value of the policy and 100% of all contributions have been returned as non-taxed distributions of premium. Something does not add up. Or maybe it does and I just see conspiracies everywhere I look. Tom Longview, TX

I can envision a situation with 2 unmarried adults living together each with their own child sharing the rent and utilities 50/50 while each one pays for their own food, clothing,etc would be able to both file HOH.

If he did not use the income for his support, but rather put it in savings, them it would not be part of his calculation. If he did use it for his support and what he paid was more than half of his support, then he must claim himself and he gets all of the credits If he did not use it for support and he did not provide more than half of his support, then the parents can choose not to claim him. He cannot claim himself, but he can get the nonrefundable portion of the AOC. There is a box to check on the form that shows that he can be claimed by another but is not claimed.

If the SSA-1099 was under the estate EIN it would be a good idea to report the gross and deduct the nontaxable portion in order to prevent an under reporting letter.

I am thinking that is the case. Client tells me that a couple of years ago (? how many) the Insurer told him to stop making payments because the earnings took care of the premiums. I am inclined to believe the calculation of the Insurance company on the surrender. Tom Longview, TX

Check and see if he had a Universal Life Policy that generated Dividends and Interest

Facts and Circumstances. Document, document, document. Be ready to defend at audit. You can distinguish the BS from a person who really wanted to start a business and make a profit. IF the expenses were things like filing fees for SOS, software, letterhead, accounting and legal, things that are really business expenses that have receipts and cannot be used personally after the closing of the business, then I say you have a good argument. If the startup expenses are a new iPhone, awesome computer and trips to resorts to hear about an awesome opportunity in a MLM company, then I would be very, very leery. Tom Longview, TX

Insurance companies should provide an annual statement showing the activity. People should save these annual statements. It's doubtful your client has that saved. You'll probably have to estimate his cost basis.

New computer, Windows 11 and few problems (knock on wood) this year but the only things I've put on it is two years of ATX and Adobe. I do save frequently if I'm in a complex return as that's the only time I've experienced shutdowns. It may be if you are doing complex returns you need to go to a top shelf program (and charge accordingly). But beware of going to another software just because you think their tech support is better--I've never seen so many complaints about Drake before. And the stress level of new software is significant.

Just received one supposedly from Drake.