Hahn1040

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.

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!

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!

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!

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

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

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.

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

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.

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

ATX is putting the retirement income on line 4a for SEP. Shouldn't it be on line 1a??? In my cases it is military pension. IS anyone else having this issue? I can just move it (I think)????

Latest developments : I met with Grandma and mom yesterday. When the deceased son's condo was sold March 2021, they gave Grandma back the $200,000 that she had given him in 2018 to purchase it. Does that undo the 2018 gift? Or is it a new gift from the estate to Grandma. Only the parents are beneficiaries. then Grandma gave the granddaughter the $200,000 to pay down her mortgage (2021 gift) also found out that mom had transferred the balance of deceased son's investment account ($18,000) to daughter and she transferred his 529 ($47,000) plan to daughter. I know that transfer to a family member is fine for a 529 but does it trigger a gift tax return? the investment account was joint with mom, so it was hers at his demise. Mom is the owner of the 529 for both the children. this family wins the prize for the most tax returns in a year!

Having a FAFSA number is the key. Though, sounds in this case that it was reported on the 1098T. Often you pay your own school for the study abroad semester.

I am 99% sure that she has no concept that the depreciation will reduce her basis.... so I would say 110% that she has no idea of unqualified use! I suspect that they believe that the rental will be a great tax write off.... her income is over $150,000 so we all know where the rental loss goes each year!

Oh I know! We all have a millions stories like that. Now I am trying to tell the mom (same family) that it was not a good idea for her to be on the deed for the daughter's house. The daughter bought it to live in eventually but is posted overseas, so she is renting it. UGH! Mom has no financial interest but the house is in both names.

Thank you so much! Do I use the W-2 wages or the net after I subtract the IRD for the wages paid after death? I really appreciate your help! Just found out that the mother cashed all his savings bonds and the interest is reported under her social security number.

Can he get EITC? He died in Jan 2020, so his wages were only $5050... after subtracting the IRD wages $1,515. He was Single age 29 no children. He did not "live" in the US 6 months of the year, but he lived in US all of the year he was alive! There must be a place to look this up..... I am not finding it.

the home was purchased with the cash from Grandma. The mortgage was obtained 4 months later. In 2020 the sister bought a house with the help of cash from Grandma. This time she got the mortgage at the purchase. Also included Mom on the deed. Then she immediately turned it into a rental. Ugh! Mom contributed nothing to the purchase or maintenance.

thanks for your response: The original purchase was all cash. several months later he got a mortgage. So it was not a refi. There was no original mortgage The sale of the house was under the estate EIN Mom and dad were both named by the court as beneficiaries

Client died Jan 2020. Single. age 29. no will. Employer paid regularly scheduled paycheck two days after date of death; then paid final for vacation time . All was credited to deceased bank account. All is reported on the W-2. I know that the pay received after the date of death needs to go on the 1041. Can I just make the adjustment by subtracting it off his personal return or do I have to get the employer to correct the W-2. I hate to have to go to the parents for this. They have been through so much! He owned a condo. So they had to go through the courts to be able to sell it. The condo closed on 3/19/2021. Is there any way I can do one 1041 to include the house sale? I don't see how I can. A fiscal year will still end on 12/31/2020. Here is another twist: When he purchased the condo in 2018, Grandma gave him the money ($512,000) Then a few months later, for some unknown reason, they decided that he should get a mortgage and pay Grandma back about half of it. The mortgage interest was never deductible because it was not a refinance. There was no mortgage paid off. SO my question here, could the interest now be investment interest for the 1041? Further complication is that the mortgage was transferred to the mother's name while the condo was owned by the estate. So the 1098 has her social security number. Thanks for your thoughts and suggestions.

And did they want you to put all the staples back that you had to remove in order to run the pages through the scanner! I have one that has no less than 4 staples per doc where she attaches a computer printed label for each doc. Just to be sure that i will be able to know which is the mortgage interest and which is the pension income!

the issue is that you cannot have more than one RESIDENT state returns you can have combinations of Res, NonRes, and Part-year Res. BUT not more than one Resident I have been able to get around this limitation it in the past by duplicating the return and then filing the second resident state from a different return. you have to unlink it. This may not work for all states

Just the other day, I had this discussion with a 19 year old college student who has at least 6 K-1s from PTPs! i asked: "Why are you investing in PTPs!?!" He had no idea what I meant. He thinks he is making money... I told him to warn his dad that the charge for his return would no longer be the "nominal add on" for a dependent's return.

I opened ATX and it is NOW making the adjustment on its own! It even has its own line on the FDC worksheet!

Thank you! I have a whole stack of these waiting for this info!