jklcpa

21 hours ago, Christian said:

Well then at their modified AGI they do not get any deductible loss and have to carry it forward.

Correct

21 hours ago, Christian said:

The $100,000 limit applies to couples ?

Yes, for MFJ the lower limit where phase out begins is $100K and the potential to claim any loss under this special provision is phased out at $150K.  Basically the potential $25K loss allowance phases out at $1 for every $2 when MAGI starts to exceed $100K.  Those amounts are halved for singles and MFS living apart all year.

The $25,000 begins to phase out when MAGI exceeds $100K and is completely eliminated when MAGI reaches $150K.

I don't think you are using MAGI and the loss properly in your calculation above to figure the allowed portion of the loss. ATX should have a worksheet that shows the calculation of MAGI and also the phase-out and/or allowed portion of the loss.

Here is a link to the 8582 instructions. A description of the calculation for MAGI is found under the heading "Part II - Special Allowance for Rental Real Estate Activities With Active Participation"
https://www.irs.gov/instructions/i8582#en_US_2023_publink1000278151

4 hours ago, Abby Normal said:

CCH owned ATX in 2012.

CCH was owned by Wolters Kluwer starting in 1996, so CCH may have been the one responsible for 2012 tax year programming overhaul mess, but the parent company of CCH at the time was WK.

I think ATX has the option to leave it there and mark it out of service. You need to do that so that it does not calculate depreciation during the period of time it was not available as a rental.

I'm puzzled as to how the PAL was allowed in 2023 when the rental was not disposed of but merely taken out of service as a rental. Did they have other passive activity income in 2023, or was the property left in as rental as available for rent and income was low enough to not phase out the carryover and current year losses?

What program is allowing this?  PAL will only be allowed if there are other passive activity income, income is below threshold for the special allowance for loss, or the activity is fully disposed of. Taking out of service and coverting to personal use is not a qualifying disposition to allow the loss.

To answer your question, if converted to personal, you are correct that the assets will not carry forward. You would have to retain all of that and enter the figures appropriately on the forms when sold, and broken down by each type of asset sold (1245, 1250, land)

I think you need to leave the entries in for the software to weigh whether standard or itemized is better. The software should still carryover the appropriate amount to next year. I'd make a note in the software or client file to pop up as a reminder on the 2024 return.

If you are using ATX, here is a CCH KB on this handling:
https://support.cch.com/kb/solution/000195265/will-charitable-contributions-carryover-when-using-the-standard-deduction-in-a-1040-return

1 hour ago, BulldogTom said:

He is retired.   Gets to contribute as a spousal IRA from his wife's sch C earnings.   They will not be able to contribute in 2024 because she closed her real estate business in 2023 and will only have retirement income and no wages or SE income to qualify.  

Tom
Longview, CA

He will have penalties each year the excess remains in the IRA unless he corrects it by withdrawing with earnings now, is able to recharacterize to traditional, or until the year he distributes enough through a normal ROTH distribution to eliminate that penalty on the form 5329.

Give the client his options because at over $400 in penalty each year, he may want to correct it.  With my last one of these, the excess into his trad IRA was only $500 and client opted to leave it in because the penalty was only $30 and a distribution would be taken the following year and would eliminate the penalty anyway.

1 hour ago, Corduroy Frog said:

I've seen a few Schwab brokerage statements this year, and only one where the qualified dividends were split out differently

Did those clients have Ameritrade accounts that paid dividends, or were they Schwab investors all year and not ever with Ameritrade?

Are the EINs for the reporting payer the same on both 1099s?  Is either marked corrected, amended, or have an issue date that indicates a more recent form?

Yes, Schwab bought out Ameritrade during the year, but your post above still does not explain why the 1099-DIV in your original post reported qualified dividends in excess of the total ordinary dividends.

Wow, obviously Schwab's reporting system isn't categorizing the dividends properly.  They merged with, or bought out, Ameritrade during 2023, so I suspect that this error may be related to that and that a correct form will be issued. 

13 hours ago, BulldogTom said:

about the stupidest thing I think a software ever made me do (print the form from our software to pdf and attach it to the return you are efiling from our software).

I think it is a limitation of IRS MeF system, not any of our tax software.

Not ATX, but I sent a return through about 1/2 hr ago and the ack was literally back within a minute.  That is the amount of time to click on ack received that changes the status to "pending", click again to receive and process the ack that changes the status to "accepted" and mark the return "complete".

Maybe it is something with ATX?

All of the off topic posts not related to tools deduction have been hidden. 

I opened the storage area to where they all are and said someday I'll get to those. Closed the door and did something else. I've probably done that each time the topic has come up over the years.

Today is the day!  . . . maybe.

I still have those too, back to the 1999 tax year when it was called Saber Pro! 

I'd prefer that this topic not be sidetracked into another gripe session until the poster's situation has been adequately discussed. It seems we already have several of those topics already going, so please stick to the subject of what the best approach and handling is, ethically, for the poster and the facts presented.

Thanks.

I agree with Tom above, and also if this was a joint custody, then the son should be a qualifying child of the dad because the kids alternated weeks between the 2 homes and he died in August, then no one else (meaning the paternal grandfather in this case) could have had more custody than the dad unless it was possibly one week more by the mom.

19 hours ago, Terry D EA said:

the previous rep for the custodian failed to follow thru and update the contact phone number and the rep today couldn't verify identity because the client couldn't receive a verification on a phone they no longer have.

Usually company's will have a secondary method of verification, but I guess not in this case.  If client can't update the phone record because the account is now closed, perhaps the custodian will accommodate a request to mail hard copy of documents to the address of record and should work if that address hasn't changed. Client may have to do this in writing if this custodian refuses to listen to that type of request via phone call.  I've had some luck with this method because a scammer doesn't have access if mailing to the original address on file. YMMV.

This may end up on extension, and I think you need to put this back in the taxpayer's court for them to provide the documentation and for them to explain what transpired. The other choice is that the client could accept that the 1099R as presented is correct and file the returns. It can always be amended later.

8 hours ago, Lee B said:

Form 1096 is only used when you paper file at least with the software I have used.

That's true, but when I selected e-file through a vendor site, it replicated a 1096 for each type, and I'd assume that means that each was transmitted as separate batch with only like forms included. That appears to be the way ATX is handling it and had done so in past years, iirc. It's been since the GADof12, the Great ATX Debacle of 2012, since I used it though.

I may need some more coffee this morning.

• Client: I'll be dropping my taxes off this morning. Our 2nd child was born Feb 17th. Hope that helps us.
• Me:  If she was born in 2023, I'll need her SSN.
• Me again: Oh, of course you meant 2023. We haven't reached the 17th of this month yet. 

At least I haven't ended a client call with "love you too" like a friend did. Friend's employer is a large city in FL.  Friend and caller (a stranger to her) both had a good laugh.

34 minutes ago, Margaret CPA in OH said:

Is a separate 1096 needed?

Yes, only one type of 1099 per 1096.

55 minutes ago, Terry D EA said:

Judy,

In my OP I did state the client requested the custodian to close the account and did provide the routing number and bank account number to deposit the funds in. I don't remember saying the distribution was non-cash. Here is section from the IRS code chart from the 1099R instructions. This whole mess is still confusing and we have another meeting Monday with a supervisor of the custodian who supposedly can tell us what is really going on.

"Use Code K to report distributions of IRA assets not having a readily available FMV." Does this mean non-cash?

Use Code K to report distributions of IRA assets not having a readily available FMV. These assets may include: • Stock, other ownership interest in a corporation, short- or long-term debt obligations, not readily tradable on an established securities market; • Ownership interest in a limited liability company (LLC), partnership, trust, or similar entity (unless the interest is traded on an established securities market); • Real estate; • Option contracts or similar products not offered for trade on an established option exchange; or • Other asset that does not have a readily available FMV. 

On 2/6/2024 at 7:49 PM, Lee B said:

The K means it was not a cash distribution.  It sounds like you need more information about the IRA and the kind of assets it held.

Well, it was already established earlier in the discussion that the types of assets code "K" is used for are non-cash types and because FMV of cash IS readily determinable.  

As I already said, if only non-cash, there would be no transfer possible into a cash-only type bank account and no possibility of tax withheld or remitted, and that is the reason I speculated that it may be assets distributed in-kind with a change of ownership title.

You already have a meeting set and only the broker, supervisor, or client would be the one(s) to tell you, or provide documentation, what asset(s) were transferred and/or to where.

If something was "distributed" in-kind via name change from IRA ownership to individual, then that will be taxable.  If that is the case, I'd ask how the gross and taxable portions reported on the 1099R were determined.

18 hours ago, Terry D EA said:

Wanted to give an update on this topic. After working with the client and custodian, the client did request the account in question be closed. While the client still maintains he never received the funds, the custodian did give the date and account the funds were wired to. The funds were wired April 13, 2023 and still do not show in the client's bank account.  I recommended an extension and partial payment as it may take a while to get this figured out. Another twist, the custodian stated the client requested 10% federal tax withholding. That amount does not show on the 1099R. 

Now I don't know if the IRS cares where the funds went or not or if they were ever received. My take is the client is on the hook for the taxes as a distribution to him has taken place.

Code K indicates noncash distribution, yet custodian is saying "funds" were wired.  How can that be if it was noncash? Also, if noncash, then it is entirely possible that there was no cash that could have been withheld and paid.

Custodian should be able to tell your client exactly what these noncash assets were and where they were distributed to.  I have several client whose brokers invested in PTP partnerships inside IRAs because of ROI and within acceptable risk.  Is it possible your client's transaction involved only a change of account titling to client's personal name and is reported as a distribution?

13 hours ago, BulldogTom said:

He does not have any records of anything coming back to him as dividends.   He remembers they sent him a letter telling him he did not need to make payments anymore, but he says he never got a dividend check.

Dividends in whole life policies aren't always paid to policy owners. In your clients case they were left in, and that's why they were available to pay premiums.  Besides being paid to owners in cash, dividends can be left in and used to pay premiums, left on deposit that accumulate with interest, or to purchase paid-up additional whole life insurance.

If there no paperwork explaining the payout and its components, the client's insurance agent or company should be able to provide the explanation and breakdown.  The business clients I've had over the years with whole life-type policies received annual statements that showed the face value, CSV, termination dividends, any outstanding loans, accrued interest on loan, net value, and any potential taxable gain on surrender.  Does your client have any statement from a prior year that may provide clues as to how the 1099R amount was determined?

14 hours ago, BulldogTom said:

As soon as he decides to cash out the surrender value of the policy is nearly equal to the face value of the policy and 100% of all contributions have been returned as non-taxed distributions of premium.   Something does not add up.  Or maybe it does and I just see conspiracies everywhere I look.

Maybe the amount isn't that farfetched. This policy is almost 70 years old, and that's a lot of time to accumulate value that's never been taxed.

As an aside, and I don't believe this is the type of policy your client had, but there is a type of policy called return of premium term life insurance. That type of policy is term insurance where the insured can have all of the premiums returned if he/she outlives the policy's maturity date. 

I've never known anyone that has this type of policy and have only read about it.