SaraEA

We were talking in the office today about how we would prepare unnecessary Sch As for clients who came in earlier just to show them how the new tax laws changed their situation. This past week or two that extra step is no longer taken. Those early clients also got our time and empathy when they owed unexpected amounts. Today we are thinking of putting another number on the phone menu, "If you owe, press 8," where they can hear a recording of the same explanation we have given to hundreds of clients this year (why keep repeating ourselves?). We will have at least 200 on extension, many of whom will call this weekend. (Why bother, we should just copy last year's extension list.) I had a few drop-offs TODAY, one of whom left a note that all her docs weren't there but she'd get them to me soon. Like I have nothing to do but work on her incomplete return. I feel especially bad for our poor receptionist who is handling a million calls a day and an endless stream of clients picking up and dropping off that last (maybe) document. It won't be long before we can all have some food and sleep.

If the estate started in 2017, it got stepped up basis and would start depreciation from that amount. Since it only filed one return you can amend 2017.

The couple has to take those contributions out right now. If they do so before the filing deadline it will be treated as if they never contributed. I don't know what the software is doing, but sometimes software is quirky when trying to handle something that is not possible (like contributing to an IRA with no earned income).

We rarely take new clients and the ones we do are referrals from good clients or others we don't want to disappoint. However, when a potential new client asks how much it will cost in the initial phone call, we typically say we aren't taking new clients. If price is the first thing on their mind, we suspect that will not appreciate the service we provide and the relationship will not be a good one. This week I have had to tell a number of clients that they owe big time, that I tried this and that but nothing helped. Every one thanked me for the effort I put in. Those are the clients we want. I had a client today who wasted so much of my time that I kept silently going into his bill and raising it. By the time he left it was up almost $100. He offered to pay even though his return is not yet completed. I suspect he fears losing me more than I fear losing him. I have heard many practitioners say that they purged their client lists of problem clients and enjoyed their jobs more while their income didn't suffer.

You can't transfer withholding. It can only go to the person, but you can't file a return for the deceased now because the SS# has likely been locked. The bank has to handle this. And the estate will not pay taxes if the income was distributed, as it apparently was.

No gift tax returns required. If the parents apply for Title 19 within five years, the lawyer who handles the application will have to deal with the transfer of funds, not you.

Medlin, the problem is that many people don't read but just click and click. I once had a colleague who wiped out Office because he was in a place in the computer he shouldn't have been in and didn't read, just clicked.

All you needed was hyphens and you'd look like you had made a common-sense-making report. I know this stuff because I was an English major.

Yesterday I entered Box 12 codes for 401k and Roth 401k. Both ended in .50 so I rounded them up. I got a diagnostic in UT that the taxpayer contributed too much. I rounded one down so the total was $18,500 instead of $18,501 and the diagnostic went away. Something is reading those codes.

The standard deduction for dependents can indeed be up to $12k. The quote from Terry D appears to be from March 2018, before the pubs and instructions were updated to reflect the changes from the TCJA. This from a later version of Pub 501 (underscore added): Standard Deduction for Dependents The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the greater of: $1,050, or The individual's earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $12,000.

If he is an employee, home office expenses used to go on Sch A under the 2% miscellaneous. That section of Sch A has been deleted, so no where for an employee to claim a home office. If he is a 1099-Misc worker, he can claim home office on Form 8829, provided it is used regularly and exclusively for business.

Hell froze over today. Not one but TWO of my clients came up with their original purchase docs for stocks bought in the 1980s and '90s! One even had the annual statements of reinvested dividends (which I had to add up, but I was so overcome with joy that I didn't mind).

The IRS will be looking for the income reported in the deceased's SS# on her return, so you have to include it there or expect a letter. On the next line I usually subtract out the after-death income with the description "reported by XXX trust EIN ###." Then report that amount on the trust. I have never gotten an IRS letter doing it this way.

I read that IRS is considering moving those excess deds to the not-2% category. The notice said they will rule on it later. If they decide to do that, and congress reinstates the extenders, we can all look forward to no downtime this summer. Instead we'll be amending return after return. I don't know about anyone else, but amendments are a pain, more so because they have to be assembled and paper filed. I have seen the loss of deduction for investment advisory fees hurt a lot of people. Several but not a lot of outside sales clients are getting killed by the loss of their mileage deductions. On the other hand, that whole misc expenses category was rife with abuse. I am trying to remember to choose sales tax instead of income tax for those clients who are way over the $10k cap just with their real estate and property taxes so any state refund doesn't show up as taxable next year. I wonder what the software will do when they essentially couldn't deduct state income taxes because the category was maxed out.

Only backup withholding can be passed through, so no break there. If the trust did not distribute the income from the annuity in 2018, it is responsible for the taxes anyway. Corpus is not relevant here, since the trust had $55k in income that it apparently did not distribute. In the future, it should distribute the income before Dec 31 so the beneficiaries are taxed on it, presumably at a lower rate. It should also specify no withholding. If this is an irrevocable trust, I don't see how an annuity can be pulled out and given back to the grantor. Best to read the trust document.

I've encountered the same situation and I agree with the above posters. The cancelled debt is income to the estate. In no way does it go on the surviving spouse's return. If the estate has closed and the assets distributed, the beneficiary is liable for the tax. If all assets passed to the spouse and there was no estate, it was insolvent.

Dave T described the trust as a revocable grantor trust. That means the grantor retains control over the assets and distributions and can even terminate the trust if desired ("power of appointment" in IRS terminology). Thus the income reverts to the grantor, as he or she still controls it. The trust must file a blank return with a statement ascribing all the income and expenses to the grantor.

Because income was reported to the trust in its EIN, the IRS will be looking for a 1041. Because it is a revocable grantor trust, the earnings belong on the return of whomever the grantor is (parents or child). The 1041 will be blank, with a statement saying everything is reported on the grantor's return and another one describing the income. It makes no difference if the income was distributed (like it makes no difference if your bank account paid you interest and you didn't withdraw it, it's still income).

Yes, I think I will boldface that quote and imbed it in the letter that goes to the executors of all the estates I do this year. They will be so impressed that they won't notice the lost deduction. Taxman, see the instructions for Line 16. Excess deductions on termination are not on the list of allowable entries. Because the FY ends in 2018, expenses go on the beneficiaries' 2018 returns, which have no place for them anymore. Interesting that IRS is considering this though. You might want to put this return on extension to see what happens (if the Bs agree).

I am getting quite a few new clients this year. We don't take many new clients because we have more work than we can handle, but we do get some referrals from attorneys, financial advisors, and good clients and take them because we don't want to disappoint. Most of these new people tell me that their previous accountant retired. With all the changes from the TCJA, I am not surprised! One way to secure your business is to find a niche. Tax law has gotten so complex that we were headed in this direction even before TCJA because no one could master it all. Those who specialize in low-income, EITC, rapid refund returns (like Block, who used to be "America's tax return preparer" and then changed its business model in this direction, and now sees the writing on the wall and is changing back) will see business drop off. I do a lot of trust and estate returns, and that business isn't going anywhere. Yet when I get a person with anything but a standard type of visa, I refer him or her to someone who knows a lot more about that area than I do. We each have to think about what area of tax we like, learn more about it, and become that kind of preparer in the future. Anyone wild about cryptocurrencies?

Did you verify the bank information in the program? In UT, you cannot do direct deposit or debit if you forgot to mark that you verified with the taxpayer.

I was working on an estate return today in which the estate sold the decedent's home (says so right on the HUD). A 1099S with the estate EIN was prepared by the attorney and then negated because he realized the decedent had owned and lived in the home for 2 of the past five years. He actually had the beneficiaries initial the form that it had met the 2-5 year requirement. Ummmmm.....the decedent did not sell the home, the estate did, and neither the estate nor the beneficiaries lived in it. I put it on the estate return even without the 1099S. The state they live in is rabid about checking public records of real estate transactions and is sure to send a bill in the distant future if it doesn't appear on the 1041 regardless of what the attorney thinks.

If the title was put in the children's names, there was indeed a completed gift (of a future interest, so no annual exclusion). It is difficult to find directions on how to handle remainder interests. I have done a number of them over the years and will look for my notes at the office tomorrow. I believe the remainder interest increases over time (as the donor ages), so you have to calculate the value on the date of sale (and calculate the value on the date of gift to determine basis). Here is a link that kind of explains it. Note that only the donor gets the Sect 121 exclusion. https://www.elderneedslaw.com/blog/life-estate-deed-income-tax-issues

Do any policymakers of either party have a clue about how much work they cause everyone by spending their time playing politics instead of doing actual work? They love to change the tax code on the last days of December so IRS employees have to scramble to update software, forms, pubs, etc. Last year they passed the extender bill in mid-February, when lots of returns had already been filed. This caused many banks that left PMI off their 1098s to pay for printing and mailing new forms, many tax pros to sift through completed returns that needed amending and then amending them, the IRS to have people hand process all those amendments. I've noticed this year that the banks are including PMI on the 1098s even though it doesn't count (yet). I have been keeping a list of clients who have PMI, might benefit from the tuition and fees deduction, etc. so I don't have to comb through my list of completed returns to try to remember who might benefit. The policymakers make it sound like (and may believe) they are helping people by doing things like the extenders, but they are actually creating havoc everywhere.

Taxpayer is wrong that amount was withheld on a after-tax basis. It is pre-tax (including FICA). If she has two or more children in care, she is allowed $3k per child on the 2441, $6k for two. Since she already received $5k tax free, she can claim the credit for the excess $1k. If she only has one child in care, no credit.