Pacun

I think you still have to give a 1099-NEC to the contractor who makes improvements to your house if you want to take a deduction or tax break... even in your primary residence.

Tax payer will be 59 and a half years old on October 30, 2023.  He withdrew $100K from his current employer 401k plan on January 2nd 2023. Will he have to pay $10K penalty on that withdrawal?  He used that money for vacations. I think I have read that you have the whole calendar year when you are becoming 59.5 years old to withdraw without penalty but it doesn't sound right. 

Just now, Pacun said:

It seems to be simple as Danrvan has said.

Cost of the house =300K
Improvments= 10K cash given to contractor plus liens paid which total $100K
Adjusted basis to the house $410K

Selling price $700K
selling cost $20K
Profit $270K.

1099 to the contractor = $110K. if improvements were only $50k, then client should have an unforseen loss of $60K... and I guess that's why the question was posted. 

The tricky part is if the contractor didn't do any improvements but rather only repairs.

 

See below

7 minutes ago, ILLMAS said:

I see this program being hacked to do the opposite of what it’s supposed to do.  

You don't need to hack it... you just need to command it to do what you want. Right now it has some parameters that limit what it can do but soon it will be able to modify or avoid those parameters and do whatever it wants.

A photographer won a huge prize because he took a picture... when he was presented with the prize or before, he said that it was not a picture, but rather an image created by ChatGPT and relinquished to the prize.  ChatGPT was also used to create a video with the movements and voice of Jerome Powell cursing and making jokes. I thought the video was real, but then again... I am not an expert.

Yes chatGPT is behind 2 years or more. That's because its creators wanted to put a leash on it. They don't want that monster to have access to all the information without having 100% certainty that it will perform as wished.

As you know, Microsoft and Google are competing with OpenAI and one of the three will unleash their version with current information just to have an advantage. Without a leash, AI will do wonders and a lot of jobs will be "lost".

As for the tax prep business, personal touches work with old people, younger people just want to know how much they will pay or receive. Most of them site in front of me intrigued with their phones. When I ask for their bank account and routing number, they get it in 5 seconds from their phones. When those old people are no longer our clients, we will have a different type of clients. 

I do feel that chatGPT could easily replace us because that monster is like having 10 preparers working on a return, especially if the client has prepared its organizer. I wonder how long it will take to chatGPT to write a program such as ATX. I also wonder when the IRS will have chatGPT or its variation testing and approving tax preparation software in the near future (10 years). 

AI will change many things including how we do our taxes. I believe the IRS will have an AI workforce working day and night on many tasks. 

I do believe that in the near future tax season will last only a week.  When CBDC is implemented and people are forced to use it everywhere, your tax return will be prepared each time you spend or receive money. Similar to the way a W2 can be calculated each time an employee receives a paycheck.

I use koinly.com to have schedule D prepared and it takes minutes to do everything (without AI). As long as I have provided access to koinly before I make the purchases, the calculations are correct. In the near future, AI will replace Turbotax and we will not have young people as our clients. How long do you think that will take? 5 years? 10 years? 15 years?

Yes, AI will have the same issues we had... we didn't not prepare the perfect return when we prepared our first returns. Even after many years of practice, I have noticed that I have not prepared the perfect return in many cases. I do believe times are changing and are changing fast and there is no way to compete with computers in certain areas. Wait for the tokenization or NFTization in alliance with AI to become popular using the lightning network and blockchain technology. The future is here but it is in beta. 

You should be able to survive for the next tax season next year with Windows 10 but you should:
1.- Back up your data
2.- Run all windows critical updates now that tax season is over

Just out of curiosity, what operating system are you using right now? Sorry to have that simple question before suggesting to move to windows 11 or not.

I installed Windows 11 a couple of months after it came out and I have had no issues but, I use my computer for business not for cool things. I have never had any problems with ATX not even when people were having a lot of issues.

I bet you it will pass on the second try as many of you did.... maybe 3rd or 4th.

What will be the correction? I guess one 1099-R with 0. Now which one was reduced to Zero? Will the IRS be able to zero in to the correct corrected 1099-R?

56 minutes ago, Catherine said:

Less than $3,000. MA personal exemption is over $4,000. No payment to either feds or state.

I would file both.

21 hours ago, Abby Normal said:

I keep my explanations brief. You listed a bunch of things the IRS already knows just by the nature of the 1040X.

Here's how I'd edit your explanation:

CORRECTED FORM 1099-NEC ($10,000).

CORRECTED 1099-MISC: $10,000
----------------------------------------------

It seems to me that line 1 net change would be zero, and the other lines only change due to form calculations, so there's no need to explain this to the IRS.

And you could combine the two lines above into one line for convenience of copying and pasting.

Brevity, above all else.

If you only glance, you would think everything will stay the same... only affecting SE, but in some cases, this event will put people outside of EIC (too much income), Make then return ACA premium advaces since the extra income will force them out of the 400%, etc.

Move to windows 11. I moved a couple of ATX packages ago and I have had no issues.

How much is "almost no federal income"? I would run the numbers and see how much she would have to pay to MA and then decide.

That's a good idea.  I usually don't like to attach anything to the returns so I might have to manually make the corrections.

Is the line by line a requirement on the 1040X? How about your software, does it allow you to type 300 words of explanation in one field?

I have about 10 returns to amend (Thank God for the extra dinero I will charge for the amendments... no mia culpa). All returns will have the same situation and what will change is ONLY amount received ($10,000, $12,000 or $17,500) and the refund amount. It will be nice if I could copy and paste this paragraph but I have to chop it so that it fits each line. Some sentences are hard to understand because of the chopping but I have to follow the line limitations on 1040X. Needless to say that I have to copy and paste 5 times. This is my explanation on 1040X.

PROGRAM COORDINATOR WRONGLY SENT FORM 1099-NEC FOR $10,000. LATER, A  CORRECTED 1099-NEC WAS ISSUED

FOR THE AMOUNT OF 0 DOLLARS. 1099-NEC WAS ORIGINALLY REPORTED ON SCHEDULE C WITH SE TAXES.

A 1099-MISC WAS ISSUED FOR $10,000 AND IT IS NOW REPORTED ON THIS 1040X AS OTHER INCOME.

AS A RESULT, LINES 1, 3, 5 CHANGED AND SO DID THE TAX LIABILITY.

PLEASE ISSUE MY REFUND FOR $1,107 AT YOUR EARLIEST CONVENIENCE.

I would be nice if I could just copy and paste everything at once. It is very interesting the each of my clients will owe state taxes and it is very interesting how I will have to explain that schedule C has two federal tax breaks that were originally transferred to the state but now we have to add them back and pay taxes to the state.  For the federal, people don't mind that those two tax breaks are gone because they are getting a refund. 

At simple sight, I would think that the only thing affected in this situation is the collection back of SE taxes because income stays the same. I was wrong. I had a client that I got an error stating during amending... you are checking earned income credit on form 8867 and no earned income is claimed. I carefully checked the return and of course, the message was correct. I was no longer claiming earned income credit because my client's income had risen.  

There are huge companies with the best computer farms and there is no chance for regular people to be profitable mining. If you have $300 a month for electricity, you are better off buying $300 in coins every month. 

Her timing was bad. I have been there and the lesson has been learned but this time is different. With lesson in my favor and $50K to invest, I would buy right now the following:

100 QNT coins at $110 each = $11,000
10,000 RNDR coins at $1.75 each = $17,500
1,000 AVAX coins at $17 each = $17,000
112,500 GALA coins at .04 = $4,500

In a year and then in two years, I will check how much each coin costs and multiply by the coins "I would have bought but I didn't because I was a polo or I didn't have the money".

Remember that my investment is for 2 years, then I would buy real estate and two years later, I would used that real estate as collateral to get $500K, to invest again. The numbers are above and with math, we will see what happens. 

Remember.... someone said, bitcoin can change the world but the world cannot change bitcoin.  Why not bitcoin in my selections above, because I am greedy and a gambler. 

 

What's the trick for stocks/crypto? Timing. So, as I am writing this, these are the prices:

Bitcoin $27,500
Eth $1,850
QNT $113
Gala .4
RNDR $1.73

Just to name a few

Will see them in a year and then in two years. 

"C-corps do not get to take LT capital gains on stock market transactions, nor can they take losses, capital and otherwise.  They can on be taken forward or back and applied against gains."

"Corporations also are not good entities to own real estate"

I guess my idea will work better to do it as a regular tax payer and file Sch D and E along the 1040.

Thank you for your replies and again, you can steal my idea and thank me in two years. 

Hypo, but I was thinking of investing in crypto now and hold it for 2 years (remember this lapse) and then buying a rental or two after the money is pulled out. Anyone is welcome to steal my idea and thank me later. 

C corporation was formed to invest in the stock market and bought houses for rent.

Let's say that the rental portion has a loss of $1k after depreciation, short term gains in stock is $6K and long term gains are $100,000. 

What rate will be used to pay taxes on the $6K ST and at what rate will be use to pay taxes on the $100K LT?

If the money is left in the C corporation for future investment, no taxes will be paid by the owners. Will this situation be better if a partnership is formed? If both partners make $100k in W2, I believe that will change everything.

Thank you for your thoughts and suggestions.

I have a client who has 4 van used in his business 100%. I have the four vehicles listed as fixed asset with their prices and depreciation flows properly.  I have a grand total of gas and repairs of $12K. How do you enter those 12K that belong to the 4 vans. Do you override line 9 on Sch C or you enter the whole amount in one fixed asset information sheet?