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About SaraEA

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  1. I've done this in a case where a couple chose MFS because they thought it would give her child more college financial aid. It didn't and it cost them a lot in taxes. H was listed first on their previous returns so I amended his only. I've also done this for the same scenario giogis has. Do the same thing, amending one return. The only problem I had was the explanation. "Forgot they were married" had to do.
  2. SaraEA

    Sec 199A / QBI Heads Up

    The regs issued last Friday finally make clear that taxable income for purposes of calculating QBI is taxable income from Form 1040 less capital gains AND qualified dividends. In several courses I was told that cap gains are deducted because they already get preferential tax treatment. Well so do divs, but I saw no place for them on any worksheets. From the Regs: Consequently, capital gains and qualified dividends treated as investment income are net capital gain for purposes of determining the section 199A deduction. There is no place on the 1040 that shows taxable income before the QBID. Guess they had to cut lines to make it fit on a postcard. It's all done on a worksheet, which shows the subtraction for cap gains but doesn't indicate that qualified divs are considered cap gains for this purpose. No wonder we're all confused.
  3. SaraEA


    In our state those who are furloughed can collect unemployment but have to pay it back when they get their back pay. At least this can help tide them over until their pay comes. Those who are working without pay are not eligible because they are "not available for work" meaning not looking for another job because they are already performing one. I know a couple who both work for IRS, one an auditor and the other in upper level. Both must be home with no income so unemployment should help them. I think there might be a lot of resentment in all gov't agencies when some coworkers get to stay home and play and get unemployment while others have to go to work every day without pay or UE. A private company would never get away with that.
  4. SaraEA

    Trump Sets Final Rules for QBI

    It will knock out all my clients if they have to keep a log of their time spent, when, what they did, etc. It's hard enough getting them to understand the necessity of mileage logs. And the "separate books and records" means what? Most of them give me a handwritten sheet where they list taxes, utilities, repairs, etc (always forget the rental income so I have to ask). I guess this is a separate record, likely gleaned from their personal checkbooks. What does everyone think about that?
  5. SaraEA


    I got excited about that too when I read the click bate. The current waiver applies when the taxpayer pays 90% of their tax bill, so this isn't a big deal (and if they don't pay 85% the penalty is still calculated on the basis of not paying 90%). Upper income people who have to pay 110% to avoid penalty get no break. Just another headline that makes it look like the IRS is being compassionate when it amounts to a hill of beans.
  6. SaraEA

    QBI from Sch E

    Dear IRS: Confusion reigns (see all of the above posts, as well as all of the similar pro and con arguments on countless other boards). Please give us a bright line test! Here it is Jan 14, filing season opens in two weeks, and tax professionals still do not know what to do.
  7. SaraEA


    In our state it is illegal for private employers to not pay people for time worked, and the DOL comes down on them hard. How do the Feds get away with this? And who in the IRS (or any other gov't agency) would gladly go to work in this high-stress job if they could just stay home and know they'll get paid anyway? I don't want to go into politics here, but at the very least can't our gov't find a way to pay those who are working? Not only will it incentivize them but it's the right thing to do. I can imagine people calling the call centers and getting very rude responders, who had to get out of their PJs and go to work for nothing and didn't get enough training in the new tax laws to even answer the questions. To repeat myself, I am SO not looking forward to this tax season.
  8. SaraEA

    QBI from Sch E

    To add to the confusion, this from the recently released draft of Pub 535, pg 2. The draft is dated Jan 7. Emphasis added. https://www.irs.gov/pub/irs-dft/p535--dft.pdf I In general, to be engaged in a trade or busi- ness, you must be involved in the activity with continuity and regularity and your primary pur- pose for engaging in the activity must be for in- come or profit. If you own an interest in a pass-through entity, the trade or business de- termination is made at that entity's level. The ownership and rental of real property doesn’t, as a matter of law, constitute a trade or business, and the issue is ultimately one of fact in which the scope of your activities in connec- tion with the property must be so extensive as to give rise to the stature of a trade or business. However, the rental or licensing of property to a commonly controlled trade or business is con- sidered a trade or business under section 199A.
  9. SaraEA

    QBI from Sch E

    I have read a lot and gone to several seminars on the topic, and virtually all of the authors and presenters said "stay tuned" after giving their yes or no opinions. After the IRS released the reg last fall they asked for areas in need of clarification. One of the national accounting boards shared their response and whether rental activity qualifies or does not was one of the first items on the list of things that needed more explanation. At this point I'd say we still aren't 100% (or even75%) sure. The 2018 UT software is calculating the QBI for Sch E activities. Do they know something we don't?
  10. At this time I'm usually psyched up for tax season, but not this year. I've done hours and hours of training and reading, but what's weighing me down is that I don't feel competent in the new tax law. Now when a client calls with a question (can I still claim my kid, should I pay my RE taxes in Dec instead of Jan, should I add up my medical expenses), I used to be able to blurt out the answer and sound like a real professional. Now there are so many moving parts I'm uneasy about delivering a quick, simple response. I panicked the other day when I entered some data into the 2018 UT software and went to view the form. I of course saw the new form and thought "where are my numbers?" After I enter tax docs, I view the form and check the totals with the originals (add up all the W2s, withholding, bank interest, etc.). That's how I double check my data entry. Very fortunately, UT has a new selection to view the first two pages of the 1040 like they used to be, where all the totals are in one place. I also review the final return with each client. Right now I don't know where anything is so I'd better practice so I don't seem as confused as they are. My second biggest fear is that clients won't be getting the refunds they are used to getting. A bunch gave me their paystubs after the new withholding tables went into effect so I could do projections (who knows how accurate they were since the specs have changed), but most have probably been enjoying their larger paychecks without realizing that now that they are losing their three kids as dependents they may be in trouble. And I don't want to think about the business owners who believe they won't have to pay tax on 20% of their profits.
  11. SaraEA

    1099 issued on sale of primary residence

    If she's lived in and owned the home for 2 of the past 5 years, you don't have to bother her with cost basis info. Well, you could ask her if she remembers how much she paid for it and give the HUD a glance for sale expenses, but you don't have to make her frantic looking for original sale docs, improvements, etc. Even if you put the whole $80k in as the sales price and zero basis, you could still exclude the whole gain under Sect 121. Because she got the 1099S, however, you do have to report it.
  12. SaraEA

    What address to use?

    I'd send each to the address for that year--they all end up in the same system anyway. I'm assuming no gift taxes are due (are they ever?) With the IRS employees on furlough, I've read that paper returns aren't being processed so no worry about being late on that count either. I did hear that if the shutdown isn't resolved very soon, they may re-categorize most employees as "essential" so they can get them back to work and into training.
  13. SaraEA

    Tax Consultants in Turbotax

    I got an email from TT today. It said hours were flexible. They actually called my home a couple of years ago during tax season. I told them that I didn't have any spare time and if I did I would spend it sleeping.
  14. SaraEA

    Estate withholding tax

    Roberts, that is correct if the estate makes the 643(g) election and files Form 1041T by March 6 (if a calendar year) or 65 days after the close of the fiscal year. I still don't know how you would calculate how much to pay in estimates. It might work with one beneficiary, or maybe a few if all get equal shares of distributions and are in the same tax bracket, but how would you know that? It would be cleaner if the fiduciary encloses a letter with the distribution warning each B that taxes will be due when they file a return.
  15. SaraEA

    Estate withholding tax

    You can make a Section 643(g) election to do this, but there are a lot of restrictions. See the instructions for Form 1041. But why would you want to do this? The estate is not responsible for the beneficiaries' paying their taxes. Further, you have no idea what each B's tax bracket is so you might pay in way too much or way too little. Let them handle it.