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  1. If he converts the Traditional IRA to ROTH, it will be reported on the 2021 return because that is when it was done. The recharacterization is reported on the 2020 return: nondeductible contribution reported on form 8606 and the statement explaining the recharacterization on a worksheet for the 8606. It is for the 2020 contribution. After recharacterization, the contribution is considered to have been contributed to the traditional IRA . but a conversion would be reported in the year it was converted.
  2. TCJA changed this: from Pub 526 State or local tax credit. If you make a payment or transfer property to or for the use of a qualified organization and receive or expect to receive a state or local tax credit in return, then the amount treated as a charitable contribution deduction is reduced by the amount of the state or local tax credit you receive or expect to receive in consideration for your payment or transfer, but an exception may apply. If an exception doesn’t apply, you must reduce your charitable contribution deduction even if you can’t claim the state tax credit in the year. the deduction on federal is reduced by the amount of the credit. There is no adjustment for state because it has been reduced on federal. perhaps your instance is different. I have a couple of people who get the Neighborhood Assistance Program credits and this applies to them.
  3. You will not have to consider the BAH and BAS (housing and food allowances) for active duty. Both are not taxable and are not reported on the W-2. as for state... once he is active duty, he will remain a resident of his state of record. So if he was a CT resident when he joined, he remains a CT resident unless he takes the steps to change it. When stationed in VA, his active duty pay is not taxed to VA. If he were to have a side-job, then that would be taxed to VA as a non-resident (form 763) . For 2021, he will be taxed on all of his income as a resident. For 2022, he may qualify to be considered a non-resident if he is not in CT 30 days and maintains a permanent place of abode in another state. see: https://portal.ct.gov/-/media/DRS/Publications/pubsip/2019/IP-2019(5).pdf
  4. Oh! I know how that is: your eyes see it but by the time it gets to the brain.... it does not register. It is definitely difficult to keep straight what are eligible expenses for tax-free scholarship vs. AOC vs LLC vs 529 expenses. ...you said he is leaving for the Marines. Did he have ROTC or Veterans benefit scholarships? Make sure that none of the allowances for housing are included in the scholarship amount. BAH is paid separately and not included in income. If he had those, look at the Veterans Administration section of Pub 970 and/or go to: https://benefits.va.gov/gibill/. Probably you are looking at the 1098-T. BAH would/should never be a part of the box 5 scholarship figure. So you do not have to consider it.
  5. Qualified education expenses. For purposes of tax-free scholarships and fellowship grants, these are expenses for: • Tuition and fees required to enroll at or attend an eligible educational institution; and • Course-related expenses, such as fees, books, sup- plies, and equipment that are required for the courses at the eligible educational institution. These items must be required of all students in your course of instruction. Expenses that don't qualify. Qualified education expenses don't include the cost of: • Room and board, • Travel, • Research, • Clerical help, or • Equipment and other expenses that aren't required for enrollment in or attendance at an eligible educational institution.
  6. One can recharacterize a current or previous year's contribution from ROTH to traditional or Trad to ROTH up to the due date of the return (plus extensions). You must transfer the contribution plus the earnings. It is treated as if contributed to that IRA in the first place. ROTH to traditional is common when AGI exceeds the income limits. When this is the case, then income is too high to deduct the contribution so it is reported on the form 8606 as a nondeductible contribution. A conversion can be done at any time. It is reported on the return for the year converted. When t/p recharacterizes to cure an excess ROTH contribution, t/p can then convert it back to ROTH. the recharacterization is reported on the return for the year the original contribution was made. The conversion is reported on the return for the year converted. Recharacterizing a conversion is no longer allowed. a "backdoor ROTH' is cleanest when done all at once: t/p contributes to traditional IRA and then immediately converts to ROTH. best when using a cash account. the traditional has no time to earn income. As long as t/p has no other traditional IRAs (or SEP), the conversion has no tax consequence. In the case of recharacterizing to cure the excess ROTH contribution, the earning are now part of the traditional account, so if they convert the contribution plus earnings, then the earnings are taxed. The contribution was not deductible so it is not taxed. IF the t/p already has traditional IRA accounts, then the conversion will result in taxable income and thus may not be attractive. If excess contribution is not cured by the due date of the return, then t/p pays the 6% excess penalty each year until it is cured. In the case that the high AGI was a one-time thing, then one can leave the excess in the ROTH, pay the 6% penalty and then apply that contribution to the next year's IRA. The advantage is that you don't have to pay tax on the earning (and a lot less paperwork) This disadvantage is you lose a year's IRA contribution.
  7. I am going through a similar scenario with a client. Discovered about a month ago that they have been contributing to a ROTH since forever. Fortunately it is just the past couple of years that have been excess. He was active duty military ... so was never close to the max until 2019 when he retired and had military retirement and civilian job that put him over. Apparently he never felt the need to tell me about the ROTH or provide any statements or 5498s... even though my worksheets ask these very questions... He was able to recharacterize 2020 and 2021. He withdrew the 2019 contribution. I had thought that he would have to withdraw contributions plus earnings for 2019. With some research, I found that once it is past the due date of the return, they just have to withdraw the excess contributions but not the earnings to cure the excess. the 6% penalty applies until the excess is withdrawn. for your client, the $92k distribution would likely cure the excess, but they would owe the 6% for each year since the excess contribution was made. Indeed! why has the IRS never caught this!
  8. Do any of you CA people have experience with taking the credit for state tax paid to VA? MY client is a dual resident. She works in VA, owns a home and spends more than 183 in VA. However, she still has close ties to CA: owns a home, files jointly with husband who lives in CA and receives a CA pension. She has spent well over 45 days there in the past two years so she does not qualify for the Safe Harbor. Both states tax all of her income because she is a resident of both states. VA instructions say that she takes the credit on the CA return for the tax on her income. CA instructions say that she can only take the credit for VA source income. therefore the pension is taxed to both states with no credit relief. Am i interpreting this correctly? Is there any way around it. I would appreciate any guidance anyone can offer. Thanks!
  9. Yes! exactly! Thank you so much. I thought it was you who had posted it! So I can save posts I want to go back to as a bookmark?? that is so valuable for me to know! I can't thank you enough!
  10. In ATX on the Home Office Expense input form, there are boxes to check to indicate Simplified method if home office was not the entire year then there are check boxes to indicate which months qualified: Check for 15 or more days qualified business use of the home. Then it prorates the deduction based on the number of months that the office qualified
  11. There was a thread on this topic in the past couple of months that had a link to an article. I have tried searching but I cannot find it. My client owns several lots and this year she sold one of the lots and purchased a condo that is being renovated for business use.. She has never used it in the past, but but it seems like a good idea for the RE tax on the raw land. Can she use it for the lot she sold? What about the condo? I am never successful in finding old posts that i want to refer to. Is there a way to bookmark or otherwise tag them? Thank you for your help
  12. Active duty can maintain their state unless they choose to change. Ask: did he intend to change? did they do all of the change residence steps: driver's license, vote, car registration etc. If he did indeed change, then he would be a part-year NJ and CT. CT is not a state that military tend to change to (FL, TX) . But he may have his reasons... If he did not intend to change, then I would file full year NJ. and non-res CT showing taxes withheld in error. In the future NJ does not tax his militaty pay if he is not in the state.
  13. Neither is going to be MFS if you split them up- unless one or both were married to other people (which would be a whole other can of worms) Each would be Single then when there was a child one would be Head of household. depending upon who has what income and how much.... might not be so bad.... Standard deduction for HH + Single is more than MFJ
  14. On the topic of "print Screen": Is there any way to print the "Bulk Disposition" screen within ATX? The only way I can do it use the snipping tool to print the screen. I have never figured out how to make ATX print it. I like to include it for my client to show where the numbers on the 4797 come from.
  15. on the 1099R input screen : At the bottom there are check boxes: "Check the box to exclude Ins premiums for retired public safety officers. (PSO) and enter qualified amount". $3,000 be sure to reduce the medical insurance premiums by $3,000 if you are using medical deductions
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