Pacun

Forget what happened and to who in the 2019 return. Concentrate on the return you have been hired to do, which is 2020. Finish the return and ask: How much did you get on your first stimulus? most likely the answer will be $1,200. Click on line 30 and answer that the person has a valid social security and enter $1,200 for the first stimulus. Then ask the person how much he received for the second stimulus and enter that number too. You are done. Of course it will be nice if you know how much stimulus they deserve. So if they are claiming two children under 17 for 2020, the first stimulus should have been $2,200 and the second $1,800. If you enter the correct amount received the computer will do the hard work for you. If the client inquires: Will the IRS ask my ex for the money back? Just say NO.

I said that I was not going to reply to this post but your points are well taken. Also, every other year I get a credit car with 18 months interest free. I got a credit card in November 2018 and the last month for me to pay the balance was April 2020. I ordered ATX 2018 software and I also ATX 2019 software (along with other office supplies) using that credit card with the hopes that I was going to pay off the balance in April 2020, but in March my business was shut down by the government so my income was near 0 in April 2020. I was affected on that angle too. So even though my income was spread out, I was affected. Notice that each case has its own merit so just by looking to the fact that I made the same amount of money (as you stated it) doesn't mean that I didn't get affected. Again, just spending $5 dollars in masks it is a burden caused by Covid-19 and the regulations (as correctly stated by DANRVAN) don't specify a dollar amount and that' why someone would argue that spending $5 dollars in mask grants withdrawing $100K from 401k and paying 0 penalty. What we are getting out of this thread is that we need to listen to our clients and see if they meeting the loosely criteria of the regulations.

So, when my tax business was shut down by the government for about 2 months my hours were not reduced? The $60 is a "tangible" example and I using. Me going "pay check" to "pay check" and for 2 months my office was shut down by the government was not a nice event. To me that sounds terrible since my budget for March was not met and April is the best month for me and my disposable income was 0. As you can see, we can make points and go back and forth and I appreciate each response. I will not reply to this subject anymore because this just a personal experience from my part but again, this forum is for us to see different angles and each opinion is appreciated.

I wouldn't think about paper filing even if it takes a month for the update.

Important Information Regarding 2020 Virginia Income Tax Returns: Virginia's Conformity to the Internal Revenue Code Advanced to Dec. 31, 2020 Under emergency legislation enacted by the 2021 General Assembly, Virginia's date of conformity to the terms of the Internal Revenue Code advances from Dec. 31, 2019, to Dec. 31, 2020. This allows Virginia to generally conform to the Coronavirus Aid, Relief and Economic Security (CARES) Act and the Consolidated Appropriations Act (CAA). However, it specifically deconforms from three provisions of the CARES Act that temporarily change limitations applicable to the net operating loss deduction, excess business losses and the business interest deduction. This legislation also deconforms from the provision of the CAA that permanently reduces the medical expense deduction threshold. The legislation conforms to the federal tax exemption for Paycheck Protection Program (PPP) loan forgiveness and certain funding received under the Economic Injury Disaster Loan (EIDL) program. However, it partially deconforms from the provision of the CAA that allows taxpayers to claim a federal deduction for business expenses funded by forgiven PPP loan proceeds. Instead, the bill permits a deduction for Taxable Year 2020 of up to $100,000 for business expenses funded by forgiven PPP loan proceeds. In addition, the legislation fully deconforms from the provision of the CAA that allows taxpayers to claim a federal deduction for business expenses funded by certain EIDL funding proceeds. The legislation also provides an individual and corporate income tax subtraction for Taxable Year 2020 for up to $100,000 of all grant funds received by a taxpayer under the Rebuild Virginia program. Tax Bulletin 21-4 explains the conformity adjustments that may be necessary as a result of this legislation. View the Tax Bulletin

Yes and yes

I think I would use the payer that withheld the most money. I have been lucky that I have had only one distribution for the husband and another for the wife.

I misread your post. So your client is deciding to pay taxes in 2020 on $100K from 401k? Or you are talking about investing back $33K to his 401k? Deferring could mean that your client wants to put back $33K to his 401k and as a result he is deferring payment of taxes until he takes it out. Deferring could also mean that he wants to pay taxes on $33.33K in 2020, same amount in 2021 and the last amount in 2022. Unless there are compelling reasons, I suggest my people to divide it in three years if the distribution was more than $30K. I run the numbers for them and when the amount is $15K or less, most people say, "I want to pay taxes in the whole amount in 2020". Also, if your client has the money to pay taxes on $100K on top of W-2 and unemployment income, it might be a good idea to use that tax money to reinvest it on the 401k after splitting 1/3, 1/3, 1/3 in 2020, 2021, 2022 irrespectively.

No, it has not been extended. The last day was Dec 30, 2020 and that date caught my eye because "why not Dec 31st, 2020"?

So you wouldn't allow me to not pay penalty based on the fact that I lost $60 and took out $100K from my 401k? That's the way I interpret the law (I am not required to pay penalty). How about my wife? She collected unemployment because she was affected by the covd-19 virus and she couldn't go to work because her restaurant closed for 3 months. She used to make $300 a week and unemployment gave her $1000 every week. Was she affected by covid? was I affected by covid? Who are we (tax preparers) to decide how she felt in quarantine without walking to work, without interacting with her co-workers? Just wearing a mask is a burden on people so don't come and tell me that Covid-19 didn't affect most people. Prior to Covid, I have only seen 2 people wearing masks in my whole life while they robbed. I know some of you love the fact that you are now wearing a mask but I guarantee you that you will NOT be wearing it in a couple of years. Again, everything is subjective and I guess that's why there is a wording on the instructions that the tax payer auto certifies that he was affected by covid.

Yes, that was my weekly groceries allowance. I ate very little that week because I didn't know where the free food was. I have seen people with Covid-19 that were asymptomatic, their employer paid them the two weeks they were out and yet they qualify for $100K penalty free withdrawal of 401k. I have seen people that have not been affected by he illness per se but they cannot get to their work place because of the restrictions. I have also seen that people are making even extra money during the pandemic and they drive from free food distribution centers to another collecting all the free items while others don't have much to eat. Who said this is not crazy?

Yes. Send the $33K back to the 401K and your client will benefit from the $10,200 tax free unemployment AND he will qualify for the stimulus signed on Thursday.

Did you enter 000000000 or nothing?

You are too fast... lol. I didn't read your previous post before posting... then I corrected it but you drew faster.

I agree with Possi. Let's wait for the update to be properly added to the software.

You are right. We, tax preparers, keep complaining that we are doing the IRS' job and that we are the enforcers and we hate it. But I have noticed that we are excellent enforcers. Not only that, we are applying common sense and logic to COVID relief, which by itself doesn't make sense in many many cases.

I don't have a cite but I read the regulations and they say that the amount lost due to covid 19 didn't have to match the amount distributed. So, on other posts, I used an example that I got a call from someone who wanted me to prepare a W7. I charge $60 for W7, but DC government had shut down none-essential businesses. So the client went to MD where tax preparers were essential and I lost that income. That event would have allowed me to take out $100K from my 401k and not pay penalty. "adverse financial consequences" to you, your spouse, dependent or household member.

the regulations read that if you were medically or economically affected by Covid 19, no penalty and you can pay taxes in 2020, 2021, and/or 2022.

Quickly seems a word of the past. I think you best bet will be to paper file. All other avenues might take a couple of years which could be twice as long as paper filing.

Meaning that it is eliminated or is added back?

Yes, but the IRS doesn't not add sch EIC to the return if the client didn't have it to begging with. Let say my my W2 income was 32,000 for 2020 and my unemployment was $10K. I filed in February as single with my daughter. At that point, I was out of the EIC bracket. As a result, I didn't include Sch EIC... I doubt the IRS will add Sch EIC (first, they don't know if my daughter lived with me) since I didn't answer the EIC questions. Even with the EIC schedule attached, for the IRS to do the calculation, I need to check the box.

Correct. Separation of service is the requirement. It could be that you got fired, laid off, or simply that you quit. Make sure you have the date of birth correctly. You don't pay penalty if you become 55 in the year you take out the money. So if you are going to be 55 on December 31, 2021, you can take out the money now and qualify.

In this case it is not the intent of the distribution that matters. What matters is if he, his spouse, his dependent or a household member was affected physically or economically by Covid-19. If he qualifies for auto certifying that he, his spouse, dependent or household member was affected by covid, he can pay tax 1/3 each year. If he is was 55 last year, then he doesn't have to pay penalty because he separated from service.

But if it lowers your income, it will make qualify for EIC either with the earned income you have for 2020 or with what EI you had in 2019.

If unemployment reduces the salary and now some people will qualify for EIC, I doubt the IRS will do anything and we will have to amend.