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Terry D EA

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  1. This thing comes down to a reimbursement for medical expenses. Any opinions on putting the contribution or reimbursement amount as other income with the medical expenses as a negative figure to zero out the other income. It doesn't make sense to pay tax on a reimbursement that was less than what was paid out.
  2. Judy, I scanned through the articles you posted and yes, they are helpful and I will research this more. It is my understanding the client was reimbursed from the Christian Care ministry for medical expenses they paid. I'm still waiting on additional clarification on this. I guess you're right on needing to slow down a bit. I agree with you regarding not being able to deduct expenses paid by someone else. So, if the client did receive reimbursement for medical expenses paid, then it should be a wash correct? The discussion within the articles you posted evolve around deductibility of the contributions or monthly share. I'll post more as to what I find.
  3. Ok, I'm bumping this up. After waiting I now have all of the documents and will add the following: 1. This is a Christian Health Care Ministry and DOES NOT qualify as a high deductible plan. 2. form 5498-SA shows total contributions of $37,220.13 3. Form 1099-SA shows distributions of $38,935.42 By the statement received from the HSA, all distributions were taken well before the filing of the 2021 tax return. Essentially, this client never qualified for a HSA because they are not covered by a HDP. So, on form 8889 do I put zero in for the contributions so no deduction is taken? Showing the distribution and the qualified medical expenses isn't a problem. Should a statement outlining what and why be included with the amendment? Another direction, would it be better to show the contributions as other income with the medical expense deduction? Using either of these methods does not change the original return balance due. I'm not sure what the IRS has in the client's transcript. I don't know if the trustee of the HSA has reported anything to the IRS. I can only tell the client they are required to file an accurate return. The only apparent reason is for accuracy and to avoid the 6% excise tax. On the surface seems simply enough. But...... I'm struggling here and need advice. Wondering if contacting the IRS for a ruling would help?
  4. Check this out to see if it helps https://www.berkshireelderlaw.com/life-estate-ownership
  5. If this is. Lifetime estate, the heirs get a stepped up basis after the lifetime tenet passes away. A lot depends on how this was written up. Ask to see the documents. You state the language says the property transfers when it is no longer used. Need to research this further
  6. Not sure yet. I don’t have an official 1099SA that shows the total distributions. I am working from a trustee statement, 5498-SA and that’s it. When I get more info, I’ll post it
  7. Client had received payments from a Christian Care insurance that is promoted by Dave Ramsey. The client chose to have the payments deposited into their individual HSA account. Those deposits are shown as a contribution on form 5498-SA as a total of $37,220.13 for TY 2021. The statement from the Trust Company shows $27,547.73 in distributions used to pay medical expenses. The difference is a contribution in the amount of $9,672.40 which exceeds the limits of $4,600.00 (client is 63) by $5072.40 which is subject to the 6% excise tax. I am trying to determine if the client can withdraw the excess now to avoid the excise tax. All distributions occurred prior to Dec 31, 2021. The client just now sent me the form 5498-SA. No contributions were shown on the 2021 tax return. If I amend the tax return to show the contributions, I'm not sure how all of this will look to the IRS. I did suggest to not have funds deposited this way. Any help with this is appreciated.
  8. Early morning for me as well. Start calling at 6:58 am. I can understand the delays. The last call I made I was on the phone with the agent for 45 minutes, so I guess it makes sense for a back log to occur rather quickly.
  9. I have been using Drake software both tax and accounting since the 2012 debacle. While I feel Drake Accounting is still a work in progress, it is not bad and use it mostly for payroll. Drake Tax however, is the best in my opinion for the money. They offer many features with one add on called "Grunt Worx". At first glance I thought it too expensive and really did not have a need. With more clients with Robin Hood Securities, Crypto and day trading, my thoughts are now greatly changed. I have had several clients day trading, some moderate, some not so much and one that had over 750 transactions. Those transactions were of the grocery store variety that prevented using a summary page. I uploaded the pdf to "GruntWorx" and within an hour and a half, the file was back and in a format to be imported into form 8949. This service cost $112.00 (.15 per transaction). The file was validated by Grunt Worx but a brief final review of the totals by me and its done. I think the review and import was only 10 minutes. The $112.00 might seem a bit high but it is nothing compared to what the client would pay for me to enter all of those transactions. I'm not sure which programs GruntWorx will work with, but the converted file is in a csv format as well. What a life saver. https://www.gruntworx.com/ if you want to check it out.
  10. This statement is also from that TaxBook and I found this in an IRS Pub as well but can't remember the number. This statement also coincides with the first statement in my other post. Depreciation Recapture—Special Depreciation Allowance When a taxpayer disposes of property for which he or she claimed a special depreciation allowance, any gain on the disposition is recaptured as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. There is no recapture for residential rental and nonresidential real property unless that property is qualified property for which a "special depreciation" allowance was claimed.
  11. It will be interesting to see the final outcome of this. Don't know about MA, but NC will immediately charge 10% of the tax due as an NSF fee and a few years ago they were going to charge a client $100.00 NSF fee when I was trying to get them to intercept or stop a draft that hadn't occurred yet. So good thing your client got the State issue resolved. If it means anything, I contacted the EFTPS folks last week for a client who gave the wrong bank account number. They were very cooperative and stopped the draft immediately. I found it odd, those folks are there around the clock but glad they were.
  12. Below is from the Taxbook. To calculate the total gain on the sale you will use the adjusted basis that includes capital improvements and depreciation. However, it still appears that any of that gain that is attributable to straight line depreciation is taxed at 25% or depreciation recapture with the remaining gain taxed at 20% or maybe ordinary income. You might or may have already looked at Pub 544. The two bolded statements below seem to contradict themselves. I didn't find any information regarding rules on depreciation recapture pointing toward in-service dates. Could you share that please? Section 1250 Property(Real property**)Ordinary Income. All depreciation is recaptured as ordinary income, limited to gain on sale. Ordinary Income MACRS. Accelerated depreciation in excess of straight-line is recaptured as ordinary income. Applies to property on which bonus depreciation was claimed. ACRS. All depreciation is recaptured as ordinary income for property depreciated under accelerated methods. Certain exceptions apply. For disposition of property placed in service before 1987, see IRS Pub 544, Sales and Other Dispositions of Assets. Capital Gain Any gain remaining after subtracting depreciation recapture is subject to regular capital gain maximum rate of 20% Capital Gain1)25% maximum tax rate. Gain attributable to straight-line depreciation is capital gain sub-ject to a special 25% maximum rate Referred to as “unrecaptured section 1250 gain”2)20% maximum tax rate. Gain remaining after subtracting the 25% rate gain is capital gain subject to the regular capital gain maximum rate of 20%
  13. Dang, ditto on the congrats to the long timers. I guess I'm just getting going good at 25 seasons. It has been a good one this year. I complicated matters by moving my home and office to another state (SC) and purchasing an RV as a mobile office to serve my existing clients in NC. Most of this occurred starting in October of 21 and bought the RV in December of 21. Granted the RV is 36ft and large enough and I was amazed at the reception from my clients. We made three trips with the longest stay being three weeks or so. Each trip takes 3 1/2 hours one way. We were blessed enough to have some friends that allowed me to setup on their property with all the connections except for sewer. They also allowed me to leave the camper for the season and not have to haul it back and forth. Had to make a few trips to dump tanks but that was a minor inconvenience. We even managed to pick up between 15 and 20 new clients. All in all I can't complain. I just finished with 15 extensions filed. Now its time to relax and find a new office building to work out of. My wife wants her home to be her home and not a business location. 20 years of that is enough and I agree totally. My new home is only 4 miles from Myrtle Beach so guess where we are headed??? Here's hoping everyone had a prosperous tax season. Thanks to all who have provided insight and help from this board. It just doesn't get any better than this. It's time for all to get serious R&R.
  14. Thanks Catherine, my sentiments exactly.
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