Hahn1040

Indeed, the worksheet is critical in getting the numbers to determine who provided how much.

Keep in mind that the critical part of the refundable portion is not just that the student provided more than 50% of own support- that is the determining factor in claiming herself.  For the AOTC it requires that more than 50% is from earned income.

SO, while the student loans represent support she provides, it is not earned income.  so if she has $12,000 in wages that she used for support and $15,000 in student loans that she used to pay tuition, the 50% is not earned income.   You have to look at the total support she provided and how much of it was earned income.

For OPM retirement, the date of retirement is critical in determining the method for the exclusion.  It has changed several times over the years.

Box 5 reports the insurance payment.  Sometimes this will include the Medicare payment.  IF they don't receive Social Security, some pay the medicare through the OPM retirement

Box 9b is the employee contribution

Pub 721 shows the various time frames

3-Year Rule

If your annuity starting date was before July 2, 1986, you probably had to report your annuity using the 3-Year Rule. Under this rule, you excluded all the annuity payments from income until you fully recovered your cost. After your cost was recovered, all payments became fully taxable. You can't use another rule to again exclude amounts from income.

The 3-Year Rule was repealed for retirees whose annuity starting date is after July 1, 1986.

There is a time frame that one can continue to take the exclusion even after all of the contribution has been recovered

there is a box to check to indicate that he is a candidate for a degree.

On the Input screen of the 1040EdExp.  it is  below the section that resembles the 1098T,  It is just above where you check that the student received a 1098T

did you check the box that he is a candidate for a degree?  If he is not, it is all taxable

I know this is an old topic but I have a question that flows from this:

MY client lives in MD thus files as a MD resident.

She has a rental in DC.  Gross rent is $20,000+

so she files a DC D-30 for the rental.  She has net income, so she pays tax to DC

Does she get a credit on the MD return for the DC tax?.  the rental income is part of her MD taxable income

AND is the DC tax deductible on Schedule A?  It certainly is a tax on income, but it is not called "income tax"

i keep thinking that i should know this...but I am second guessing myself.

thanks so much!

One solution is to leave it in and pay the 6% excess contribution penalty and then apply the contribution to 2020.  Of course, this only works if she has earned income in 2020, is not over the income thresh-holdings, and otherwise meets the contribution requirements. 

I have a new wrinkle to this: What if they retire?

I have one:  They owned and lived in it 2008-2014.  started renting in 2014.  He retired in 2019

then sold the rental 2020.

121(d)(9)Uniformed Services, Foreign Service, and Intelligence Community

121(d)(9)(A)In General

At the election of an individual with respect to a property, the running of the 5-year period described in subsections (a) and (c)(1)(B) and paragraph (7) of this subsection with respect to such property shall be suspended during any period that such individual or such individual's spouse is serving on qualified official extended duty—

SO... does that mean the period was suspended from 2014 (start of rental) to 2019 (retirement) and then the 5-year period began again in 2019.  With that, they would have 15 months (2019-2020) plus 9 months prior to renting in 2014 for a total of 24 months to qualify for exclusion.  The gain is almost $80,000 after the 1250 unrecaptued depreciation.  So this will make a large difference.

OR does retirement just negate the suspended months and he goes back to rule for most people?

I've never had one like this... in most of my cases all of the gain is based on the depreciation... so there is nothing to exclude

I appreciate any input!

The bottom line is that no matter how large the exclusion, they have to pay tax on at least the portion of the gain based on the depreciation.  The exclusion only applies to the portion over that amount:

total gain: $100,000  Accumulated Depreciation: $60,000 amount eligible for exclusion: $40,000  Thus, the partial exclusion is more than enough even if they qualify for the suspension of the 2 out of 5 year rule.

total gain $40,000 Accumulated Depreciation: $60,000 amount eligible for exclusion: zero .  $40,000 taxed as unrecaptured 1250 gain: max of 25% 

based on 15 out of 24 months of residence.  Likely a partial gain is more than enough

If you need the form 9325 for your client, you can you download it from the IRS and fill in the data from your system. 

You have all of the info that you need to complete the form.

The Sale of Home worksheet has a place for the depreciation taken on line 9.

On Taxwise, the Sale of Your home worksheet is Sched D worksheet 2

If they only lived in it for 15 months, they would qualify for a partial exclusion.  Which may be enough depending upon the amount of the gain. In so many cases all of the gain is because of the depreciation, so there is no gain to exclude.

How long have they owned it?  If they had lived in it prior to the five years, those months can possibly count.  For military, the five years can be suspended for up to ten years.  You only need to look at this if the partial exclusion is not enough to exclude their actual gain.

Thank you that answers it!   the carryforward disappears and is added back to the basis of the investment for purposes of calculating gain or loss on disposition.

The adjustment listed on the sales schedule is only for 2018 and 2019 (the TCJA years) and yes it has been part of the basis adjustment for 2018 and 2019.

Thank you so much for your help!

does anyone have a reference for the section 163 (j) adjustment when reporting the sale of a PTP?

My client has two PTP sales and both have this listed on the sales schedule

I can't figure out how/where to report it or make the adjustment.

In the notes the sales report says: " If your 2018 or 2019 K-1 shows any Excess Business Interest expenses in Box 13K and you sold all of your partnership interest in 2019, please consult your tax advisor regarding adjusting the basis of your sold partnership interest by that amount."

Do I just add it to the basis?  Seems too simple???

...oh how I hate PTPs!!

Did you "zoom" into the meeting since you could not attend in person?

Just out from VA tax:

Important Information Regarding Virginia's Income Tax Payment Deadlines: Interest Waiver for Certain Tax Payments in Response to the COVID-19 Crisis 

Virginia Tax is announcing that certain income tax payments originally due during the period from April 1, 2020, to June 1, 2020, may now be submitted to the agency without
the accrual of interest as would otherwise be required for late payments. This waiver of
interest only applies if full payment is made on or before June 1, 2020. For a taxpayer
filing on extension, at least 90% of the total tax liability must be paid by June 1,
2020, in order for the interest waiver to apply. If the interest waiver applies to such a
taxpayer, no interest will accrue on the amount of tax paid by June 1, 2020, but interest
will accrue from the original due date to the date of payment on any amount left unpaid
after June 1, 2020.

All income tax filing deadlines remain the same, including the May 1, 2020 individual income tax filing due date. However, Virginia does already have an automatic, 6-month extension to file (7 months for certain corporations). If you file during the extension period, make sure you still pay any taxes owed by June 1, 2020 to avoid penalties.

Late payment penalties will not be charged if payments are made by June 1, 2020. 

In addition, Governor Northam has submitted a budget amendment to House Bill 29 and House Bill 30 to waive interest on income tax payments originally due during the period from April 1, 2020 to June 1, 2020 if payment is made by June 1, 2020. If approved by the General Assembly at their April 22 reconvened session, this waiver of interest would apply to TY 2019 final payments and extension payments. Any addition to tax otherwise applicable to estimated payments for the first quarter of TY 2020 would also be waived, provided the payment is made by June 1, 2020.

Have not seen that they have voted to waive the interest... so as it stands now.. interest but no penalty  if paid Ma1- June 1

https://www.tax.virginia.gov/news/coronavirus-updates

Here's a new one for me:

Per IRS e-file specifications in Pub 1346, the zip code entered is not valid for the state

It is a DPO, AE address for diplomat overseas. 

i have had lots of DPO, APO addresses with no problem

I will ask the client... but they have lived there over a year and I see that all of their docs have this zip

has anyone seen this??? have a solution???

thanks!

Just make an extension payment for VA.  Use worst case for what he might owe.

then in July file both together when he has it figured out

If he has overpaid, apply it to 2020 or get a refund

I had this problem before any of the extension/deadline issues.

The first time, I tried everything I could think of to get rid of it, but since there were no exceptions being used, there was no way.  So, i just make a pdf of the form and attach it. It seems absolutely insane since the form is already a part of the state return.  Why does it need an attached pdf?  It takes a few extra minutes to make the pdf, but then it is satisfied and allows me to e-file.

A problem with getting rid of the form is that sometimes when you open the return again, it pops back in even though you had told it to go away.

And for me, most all of my clients rather pay the penalty when they file rather than receive that letter in a few weeks (this year probably months).  Inevitably the have forgotten all about the warning that they may receive a bill, so they go into a panic and call me exclaiming:  "I thought I paid all my taxes! Now they want more!"

thank you so much.  That is great info

Do you (or anyone out there)  have an IRS code source for this?  I would like to see what the code actually says about it.

does the student have to pay the parents rent to qualify?  Does he have to buy his own groceries so that he has his personal receipts?

New client took $26,000 distribution from son's Coverdell

Tuition and fees paid in 2019 were $11,000.  They had a few hundred dollars of other qualified expenses: books, computer, internet.

Financial advisor had told them that they could take distribution based on expenses they had paid over the past three years.

Trying to come up with additional qualified expenses paid in 2019.

Student lives at home .

I recall having read something about being able to use some part of living at home for room and board.  I cannot find where I read it to see under what circumstances and how much could be allowed as qualified.  Does any one here have a reference?  I would really appreciate any input here! Thanks so much!

I just updated my forms and ATX has updated the E-file in support of Extenders Legislation

updated to allow Direct Debit payments dates of up to new due date of 7/15/2020

A problem we see is that some will see "penalty free" but they hear "tax free" and then they don't even read the part about paying the tax over three years because in their mind, it is tax free.

And those are the ones that don't give us the 1099R "because it is not taxable.... just like the ones who don't think their distribution needs to be included on the return because "I already paid tax on it".  Yes, we tell them, they withheld some tax, but it IS INCLUDED!

they should be on  the E added to this year's losses

look on line 22

When you read through the instructions you see that a determining factor is were all of the assets in the trust?  Is there also a will?  Are there assets that require an estate?  Is there an executor or is it administered by the trustee?

Read the instructions for form 1041

Taxpayer identification number (TIN). All QRTs must obtain a new TIN following the death of the decedent whether or not a section 645 election is made. 

it addresses in detail how to handle the trust