jklcpa

Some of the highlights are below from a two-page article in today's Accounting Today. Notice that in the list of attendees there is no one from CCH. That's really very disappointing. "Internal Revenue Service Commissioner John Koskinen met with the heads of some of the major tax software companies, tax preparation chains, state tax commissioners and other officials in an effort to combat the growing problem of identity theft and tax fraud. The group included H&R Block president and CEO Bill Cobb; Intuit president and CEO Brad Smith; Liberty Tax Service president and CEO John Hewitt; Thomson Reuters Tax & Accounting managing director of the professional segment Jon Baron; Rhode Island Tax Administrator David Sullivan, who is also president of the Federation of Tax Administrators; Drake Tax Software CEO Phil Drake; FileYourTaxes.com CEO Timur Taluy; and Green Dot CEO Steve Streit. Representatives from the Free File Alliance and CERCA, the Council for Electronic Revenue Enhancement, were also in attendance." They agreed to form three working groups—overview, technology and information sharing—to work on issues such as taxpayer authentication, identity theft prevention and analysis." We've been concerned for years...plan to take additional steps...two-hr meeting exchanging views.... "The three working groups will build on the work that’s been done in the past by the IRS, state tax administrators and technology companies. They plan to focus on steps that can be implemented for next filing season and hope to come up with recommendations by this summer to give tax software companies and preparers time to adjust their systems." There's talk of trying to utilize direct download of W-2 data directly from software vendors as an added security measure in taxpayer identification, the IRS receiving W-2 information earlier in the season and verifying that first, and slowing down refunds or refunding money later in the year. The article goes on to talk about tax preparer training and that the IRS will be asking Congress to give IRS authority to require a minimum of training for tax preparers. It also mentions the use of debit cards for issuing refunds, and that it will be making changes so that the IRS system will differentiate between refunds issued via direct deposit to bank accounts and those issues on debit cards.

For what it's worth, the text below is from pub 551 updated 12/2014, so presumably this takes into account the new repair regs: Demolition of building. Add demolition costs and other losses incurred for the demolition of any building to the basis of the land on which the demolished building was located. Do not claim the costs as a current deduction. Modification of building. A modification of a building will not be treated as a demolition if the following conditions are satisfied. 75 percent or more of the existing external walls of the building are retained in place as internal or external walls, and 75 percent or more of the existing internal structural framework of the building is retained in place. If the building is a certified historic structure, the modification must also be part of a certified rehabilitation. If these conditions are met, add the costs of the modifications to the basis of the building.

Randall and Burke, you are correct! I started to change my post right after I made it and didn't change it all, then interrupted by appointments. One of my clients had the exact same thing this year, and just talked to him about this about an hour ago! He had a policy that he rolled about $42K into something else with a 1035 exchange, 1099R with a code 6 for the exchange. Then he also had the nasty surprise of a second 1099R of over 18K of accumulated dividends in excess of basis that were used to pay the premiums over the years. Normal distribution and no cash received. He thought the 1099R was in error and called the company to find out what it was all about. Of course, he didn't tell me about the 18K when I did his tax planning for a sale of investment property, and with the 18K and him reaching a higher level of a large bonus last year, he is now subject to AMT, the NII and the additional Medicare tax too, none of which I had in the planning. Even after the estimates I'd set up, he owes over $11K on the Federal return alone.

I agree too. No filing is necessary because none of the SS is taxable, so they have only the $800 to consider for determining whether or not they need to file and also for the kiddie tax. The kids are not subject to the kiddie tax in your example either.

Some policies, like whole life and universal life, combine insurance and savings in one product. Cash value in these builds up and dividends are paid on the savings, and like B Jani said, these policies have the option to apply the dividends to the premium that is due. Your client's policy came to maturity (reached a certain age) and it had a build up of cash value that is shown in box 1 of the 1099R. Box 2, the taxable portion, is the amount of cash value in excess of basis. Basis is the total premiums paid over the life of the policy. The maturing of the policy might have occurred earlier in the year before his death and that is why the daughter doesn't know he received these funds. Does the 1099R or paperwork indicate a date that this payout occurred? The company could tell you that so that daughter could find out where the money went, and the age when the policy matured. Might be age 95. Then your client died and the face value plus terminating dividend was paid out. The payout at maturity and the payout at death might be two separate events. I think you might be confused by the daughter's statement about the $5500 payout being all they received and trying to match that up with the 1099R you are looking at. The 1099R you have seems to combine the maturity and the death benefit of $5000 (face value of the policy) into one form. If your client had died prior to reaching the age specified in the insurance contract, the beneficiary would have received only the death benefit, and the accumulated cash value and dividends would not have been paid out, the insurance co would have kept that. That is why these types of policies are not great investments.

Those dividends could have been being used to pay the premiums each year too. Sometimes they don't exceed the premium and so no cash is received. What you posted does make sense. All of the accumulated dividends and cash value of the contract exceeds the basis in the contract (total of prems paid). Your client should have received that cash, and I wonder if it was paid to him before the daughter took over. http://www.themadisongroup.com/Resources/Taxation%20at%20Maturity%20-%20Cash%20Value%20Life%20Ins%20bulletin.pdf

The deduction for investment interest expense is limited to investment income. Investment income generally is interest and dividend income, and any cap gain that the taxpayer elects to be treated as investment income. If your client didn't pay any investment interest expense or have any carryover of that type of expense, then form 4952 is not necessary. Keep in mind that any cap gain income that the taxpayer elects to treat as investment income will be taxed at ordinary rates (in other words, the TP is electing to forego the cap gain rate on this amount of income he/she elects to treat as investment income). Your program is including form 4952 because of the K-1 input that is reporting investment income. I have a good example that I just worked on this afternoon. The taxpayer and his wife had a beach condo held as an investment and it had a mortgage on it. That portion of the mortgage interest was investment interest expense, and it was never deducted on any year's return because they only had tiny little amounts of interest and dividend income each year, so they've had a carryover of investment interest expense of about $11K each year on form 4952. They sold the property in 2014 and now have a capital gain on it. They will elect to treat $11K of the gain as investment income and pay ordinary tax rate on that portion of the gain (foregoing the cap gain rate) so that they will be finally be allowed to deduct the expense that has been carrying over. Even though they are paying ordinary rate instead of cap gain rate, they are saving about $3300 in tax because of the deduction being allowed that ultimately flows to Schedule A as an itemized deduction.

My clients read the letters, give me stacks of the charitable contribution letters, and have miles documented. Not weird, we've just trained them well.

Seriously? Are you for real? Yeah, it stopped me dead in my tracks too that you say you spent thousands of dollars on this training. Goodness, you can purchase an unlimited webinar package from Surgent McCoy right now for $649 that will give you access to hundreds of live-presentation courses.

MAS, the above answers might be incorrect. You need to check the box on Form 1040, line 61. Whether or not you need form 8962 depends. Please see "Who Must File" below from the instructions for Form 8962. If the person purchased insurance from the exchange, he or she will receive the 1095-A even if no APTC is paid. In general, if the person received the APTC during the year, then the 8962 is required. IF THE PERSON NOW QUALIFIES for the PTC, OR received the APTC, then file the 8962. IF THE PERSON DOES NOT QUALIFY for the PTC now and never received any APTC, then do not file 8962. But please, see the instructions below. From the instructions: Who Must File You must file Form 8962 with your income tax return (Form 1040, Form 1040A, or Form 1040NR) if any of the following apply to you. You are taking the PTC. APTC was paid for you or another individual in your tax family. APTC was paid for an individual (including you) for whom you told the Marketplace you would claim a personal exemption and neither you nor anyone else claims a personal exemption for that individual. See Individual you enrolled for whom no taxpayer will claim a personal exemption under Lines 12 through 23—Monthly Calculation, later. If any of the circumstances above apply to you, you must file an income tax return and attach Form 8962 even if you are not otherwise required to file. You must file Form 1040, Form 1040A, or Form 1040NR. If you are claimed as a dependent, the person who claims you will file Form 8962 to take the PTC and, if necessary, repay excess APTC for your coverage. You do not need to file Form 8962. If you are filing Form 8962, you cannot file Form 1040EZ, Form 1040NR-EZ, Form 1040-SS, or Form 1040-PR. If someone else enrolled an individual in your tax family in coverage, and APTC was paid for that individual’s coverage, you must file Form 8962 to reconcile the APTC. You need to obtain a copy of the Form 1095-A from the person who enrolled the individual.

Any business returns I've filed, I get the acks back in a couple of minutes. Is there some particular reason why you couldn't file the NY return at the same time as the Federal? It's been an hour now since you posted. Are you still waiting on the ack? To answer your question, yes, I believe you would have a late filing penalty if the NY isn't transmitted before the deadline.

It's ordinary income taxed at the ordinary rate because it is considered compensation because the employee receives the award for their service to the company. It should be in his W-2, subject to withholding. Be sure to read up on how the sec 83(b ) election works. This article from Grant Thornton is pretty good and explains it, including the vesting and other issues with these. Or this one from Fidelity that is in a FAQ format might be an easier read that gives the highlights of how these work.

If you entered both on a line 21 worksheet though, the 1040 will report -0- on line 21 and the worksheets aren't transmitted with the e-file. Are you planning on attaching an explanation, or possibly creating a pdf of the worksheet to e-file along with the return? Or filing on paper? ETA - I played with a dummy return in Drake and if there is more than one entry on line 21 it creates a supporting statement, so maybe that would be e-filed with the return, I don't know. Terry, can you tell if the supporting statement goes with the e-file in OneDesk like ATX users can see the forms and other data that are included in e-file?

Right, brokers won't care unless they are forced to include all bases in the 1099s they issue. I was responding to Randall's comment that after a number of years we won't have to worry about this as time goes on, and I was merely pointing out a very common occurrence of inherited stock that will continue to cause brokers to not be reporting all bases on the 1099s that are issued.

Sounds like they have the return in processing and are checking the identity before continuing. It's a real letter according to the IRS website. http://www.irs.gov/Individuals/Employees/Understanding-Your-5071C-Letter

We'd like to hope so, but I've had brokers tell me that their organization won't enter or track any basis that wasn't derived from transactions that their firm didn't initiate or take place while the investor wasn't their client. Good example is if the client has inherited stocks, I've had brokers refuse to enter those into their system to calc the gain or loss because they don't want to take responsibility if the figures are incorrect.

I have one too and Drake is telling me to attach a pdf of the 1098-C, so that is what I'd do. It will be documented that it went with the e-filed return and there'll be no paper for the IRS to lose.

Dear Caller-Never-To-Be-A-Client-Maybe: Called yesterday, left VM: "I called a few days ago wanting to know if you could do my return. (strike #1-lies...or alzheimer's?) I need it done as soon as possible as I'm going away for a month. (strike #2-not my problem) I live [insert local address here]." Me: rolls eyes. He's never called before according to caller ID. Other than a couple of telemarketers, I've had no calls that I did not recognize. I didn't have time to call him back until after dinner, and I decided that after 8:30pm was too late to start calling anyone that wasn't an existing client. Called early this morning before I'm out of bed (strike #3-are you serious?!), another VM: "I see you tried to call me back yesterday and I couldn't get to the phone" (strike #4-must be a liar). Uh, not unless I'm sleep walking and returning calls in the middle of the night!

I don't want to think about the number of returns remaining, although I do feel like I accomplished a lot in the last couple of days. I filed my returns today too! Yay, come on big money! *claps hands and dances like a silly Wheel of Fortune contestant* Just kidding. What is this vacuum thing you all speak of?

Goodness, is this more shifting of sand under our feet? Thanks for posting this. I wish I had time to read it.

SCL, did you notice that the post you quoted and questioned is almost 2 years old and the person only made 2 posts? The last time the person was on here was the day that post was made.

Yes, that is what I would do. If you want a cite, I believe it's Reg. §1.1250-3(b )(2)

Tom, keep in mind that life insurance proceeds are subject to corp AMT if the company gross receipts are high enough for it to be subject to this tax. If they are close to being subject to the AMT and life insurance is being used to fund a buy-sell agreement, you want to make sure the company doesn't fall short of the goal because of having to possibly pay taxes on the proceeds. If it's a small enough company, this probably isn't an issue.

Joan, I found where that reference came from about the states not being allowed to tax retirement income that meets the criteria I found in those articles. It is in Section 114 of Title 4 of the US Code, specifically sec 114(a) and 114(b )(I). This is the section: https://www.law.cornell.edu/uscode/text/4/114 . Here's another interesting article from a law firm that finally led me to the proper reference: NY Acts on Taxation of Nonresident Retirement Income, While Recently-enacted Federal Legislation Prohibits States from Taxing Retirement Income of Nonresident Partners

This is all very weak, but I'll share what I found so that maybe it will help you in some way. I think that 10 years might be the key for your client. I can't find an actual reference in the code or regs (somewhere in 409A maybe?) for this statement that I found in 3 separate articles that maybe you can use as a jumping off point for your further research. What I found says: Under federal source taxation law, deferred compensation earned by an employee or former employee while a resident but paid when the individual is a nonresident, cannot be subject to that state’s income tax if: i) compensation is payable over the individual’s life or life expectancy or is paid in installments scheduled over 10 or more years; or ii) the compensation is paid under certain qualified retirement plans or “excess plans”. That quote was found in the following article that is about retirement planning when it involves deferred comp and deciding on what state to live in, and how this will affect the taxes: http://www.ebsplans.com/linked/ebs%20news%20sep%2008.pdf Found this article entitled "New York Taxes A Portion of Stock Option Gain of Nonresident Retiree" http://benefitsnotes.com/2012/12/new-york-taxes-a-portion-of-stock-option-gain-of-nonresident-retiree/ and this one from the same blog entitled "Nonresident Employee Avoids New York Taxes on Deferred Compensation Payment" http://benefitsnotes.com/2013/05/nonresident-employee-avoids-new-york-taxes-on-deferred-compensation-payment/ As I said, weak at best, but I thought I may as well share it in hopes that it will lead you to finding substantial authority for allocating this income.