Terry D EA

Abby this will be interesting. I partially agree with your position. However, if a deceased person's tax return was checked as final, there won't be a filing requirement for 2020. Or if the return was not checked as final, the decedent would not have income (maybe some would as an estate winds down) and thus no need for a personal 1040. Not sure if this would be handled on the estate tax return if there was one. A lot of unknowns. I have a check for my deceased mother and plan on holding onto it until further guidance is given. I'm definitely not cashing it. The IRS mail is a nightmare and no guarantees the check won't get lost.

I always question them and advise them as Catherine has said. I tell them I don't want any surprises in an audit. Also, if it is a new client, they get questioned a bit harder and if I think I smell a rat, then I set them free. Agree, document. I use Drake and keep notes in the client file. I add the date and time along with the details. I show it to the client for their approval.

Sorry everyone, I typed the OP in a hurry and was not very clear. So, here goes, this client purchased this home approximately 5 years ago. After living there for three years, they converted the property to rental and it has been rented for the last two years. I understand the two years doesn't have to be consecutive and I also understand that any depreciation taken has to be recaptured when the property is sold. Because it is still rental property and they are looking into selling it, I don't think the 121 exclusion applies. I understand it would if they convert the property from rental to personal use. If the 121 is allowed due to the five year rule, the depreciation would have to be recaptured which would result in a capital gains tax. I am advising my client against this because they maybe selling their primary residence as well and can only take the 121 exclusion once every two years.

Client lived in the home for three years and two years ago and converted it to rental property. They are selling the property, I don't think the 121 exclusion applies here. Need a reference as well if someone could provide one.

At the top of the general forum, Judy has pinned the all QBI posts and discussions. There is a wealth of information that will help. Everyone here has given you excellent and expert responses. However, under the QBI tab you can find resources and code references you may need. I didn't read all replies in depth but your client has to make the safe harbor election if they qualify. Depending on which software you are using, you may need to include this yourself. Drake has an election that will go with the tax return when it is transmitted.

Drake provides both Federal and State tax comparisons with each return processed. Most folks don't give much attention to tax rates. During the review of the tax return, I explain the tax rates but the looks I get suggest they are not all that interested. Usually its the folks who are investing and my larger rental clients that are concerned with tax rates and capital gain tax rates.

Exactly what I'm going to do. Gail made me take a second look at how the check was addressed. It is in my mother's name but the word dec'd was not beside her name.

I received a stimulus check for my deceased mother. I know the envelope says check the box and drop in the mail. But....I don't trust the mail and with the current IRS back log of everything, I am feeling uncomfortable just "dropping" it in the mail. Has anyone seen any further guidance on how to return this? I've read several articles some questioning the legal aspect of the law regarding returning it, the fact it is a tax credit and will be reconciled on the 2020 return, Munchin stating the checks "should" be returned and future guidance is coming. As for my situation, there won't be a 2020 return for my mother. If anything it goes to the deceased's estate. But, most estates are closed. My mother didn't have an estate due to being a Medicaid recipient. So, at this time, I'm just going to hold the check for a while Anyone agree or disagree?

I too would have never thought anything different. I guess the key word is "common sense"

I believe I read somewhere that these checks issued in error would have to be reconciled on the 2020 tax return. I think it may follow the same example of the person who has not filed a 2019 tax return but received a stimulus check based on 2018 and their 2019 taxable income is above the threshold, they will be required to reconcile that with their 2020 filing as an additional tax due. Too many scenarios and mistakes makes me glad I haven't got mine yet. I'm one of those who paid by direct draft for 2018 and have not filed my 2019 yet. Working on it but it may be a moot issue at this time to be in any hurry to get the 2019 done. I'll have to pay again so......

The link below is just hot off the press from the IRS. A lot of important information for answers regarding the employee retention credit and the PPP loan. https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

Yes, this was just changed I believe Friday the 10th.

I knew this was the case when the IRA is inherited but wasn't sure when making up a shortfall. Thanks Judy it is greatly appreciated as usual.

This is just my opinion and I am not being critical of the OP. But the amounts we are talking about here regarding depreciations, possibility oi SE tax are very insignificant so is it worth splitting hairs over? I agree with Max, put it on the E and be done with it.

I have nothing to add here as Judy hit it spot on. But... can the benes request tax to be withheld from the rmd's that make up the short fall to reduce or eliminate a huge tax burden at the end of the year??

I've only heard that they are not processing any mailed returns cause there is no one there to handle them. However, they are processing EFTPS enrollments. Just finished one tonight that was applied for last week. I had a client mail a trust return certified mail with return receipt. That was two days before the announcement by the IRS that trust return filing deadline had been extended as well. That's twice the IRS has gotten me this year. I did inform the client that the mailing receipt with the tracking number was evidence of the mailing in the event it gets lost. After this mess is over, I feel there will be another jumbo mess coming. Am I the only one????

Pacun, the only way I do what you say is if I am amending a return that I did not prepare. I don't use ATX any longer so I cannot help grandmabee but see she found the answer anyway. Congrats!

I agree chalk it up to experience. I have had clients like these in the past and realized how glad I was to be rid of them. Too much at stake today to take any form of risk. In my 24 years of preparing taxes, it seems for every client I lose, deadbeat or not, I gain three clients in their place. I don't know why this works this way but it does. There are three clients I have not seen yet this year. I have already taken on enough new clients to replace them. So, go ahead and vent as you have. Now go have a relaxing weekend.

I posted a question about this topic earlier. I was questioning the ability to take bonus depreciation or expense an HVAC unity placed in service by one of my rental clients. Until this new procedure the only option was to capitalize the expense for the 27.5 years. I did this and have filed the client's tax return and it has been accepted. Now the new procedure. After reading this my only choice now is to ask the client if he wants me to look into amending the return to claim the bonus depreciation. I think that is possible without the 3115 but not sure. What do others say here? Here is the new procedure. I know some do not like opening links but this is too long to copy and past into a post. https://www.irs.gov/pub/irs-drop/rp-20-25.pdf

The IRS has launched more information regarding these scenarios. For me personally, and some of my other clients, we get the response that they cannot verify our information or eligibility for the stimulus check. Each one that I have been trying to look at, including me, paid a balance due via direct draft. The IRS will NOT use that bank information and does not give the option on the Get My Payment button to enter or change bank account information. Also, to add, neither I nor these other clients have filed their 2019 tax returns. They were set to be extended and were not due to the IRS extending the filing and pay dead line. The response is those like me will have to wait for a check in the mail. Unless, I get the 2019 return(s) filed quickly.

Your client should have the received the letter Judy is speaking of. Yes, ID PIN expires every year. Just to reiterate, the taxpayer will receive a new ID PIN each year. This is done to protect from any further thefts. Normally, I would say to have the client contact the IRS to get a new ID PIN but there is no one there and getting an answer during this pandemic is probably impossible. I would agree with Pacun but there won't be anyone processing returns at the IRS for a while. Unless you client can come up with the letter, I'm afraid he/she might be in for the long haul.

Lion, the invoice is one line for $4200.00. I 've also read where you can't separate the installation costs from the price of the unit to take the 2500 de minimis safe harbor. Not really looking for anything less just trying to save tax dollars. The client is actually ok with the 27.5 years and claims he understood completely. They did get a small refund this year and will need the depreciation next year, kid turning 17 and spouse increase in income. So for tax planning purposes it is better not accelerate. Of course I determined this after I posted above. Possi, I agree totally, 27.5 years is it. The articles I read I assume they left off the part regarding non-residential rental property.

I am sure this topic has been tossed around numerous times. Client owns three residential rental properties. Each property is a single family residence. They replaced the HVAC (Central Air) unit in one property for $4200.00. I am reading conflicting articles regarding the HVAC unit qualifying for 179 deduction beginning in 2019. I am fully aware the HVAC unit is classified as an improvement/betterment and is capitalized for 27.5 years. I have looked at the de minimis safe harbor, small business safe harbor and none of these appear to apply for one reason or other. To give some background, the property the unit was installed at, has an adjusted cost basis of 59K which the cost of the replace exceeds the 2% requirement. Also, because the client does not have an AFS, the 2500 de minimis safe harbor cant' be used. The only thing I have found regarding HVAC units is the 179 deduction qualifies for HVAC, roofs; etc for non-residential real property. This same language was in the 2019-08 Revenue Procedure that outlines the amendments regarding deducting expenses as a result of the tax cuts and job act: "The Section 179 deduction applies to tangible personal property such as machinery and equipment purchased for use in a trade or business, and if the taxpayer elects, qualified real property. The TCJA amended the definition of qualified real property to mean qualified improvement property and some improvements to nonresidential real property, such as roofs; heating, ventilation and air-conditioning property; fire protection and alarm systems; and security systems. Revenue Procedure 2019-08 explains how taxpayers can elect to treat qualified real property as Section 179 property." So, am I correct that the only option this taxpayer has is to depreciate the HAVC unit for the 27.5 years and that's it?

This post may belong somewhere else and Judy can move it if it does. There is a new "Employee Retention Credit" on the IRS page to assist employers as a result of COVID-19. This credit can be refundable as well if the employer meets either of the two requirements. For those who don't like opening attachments: Employee Retention Credit The Employee Retention Credit is a refundable tax credit against certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. Eligible employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. Also, if the employer's employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS. For each employee, wages (including certain health plan costs) up to $10,000 can be counted to determine the amount of the 50% credit. Because this credit can apply to wages already paid after March 12, 2020, many struggling employers can get access to this credit by reducing upcoming deposits or requesting an advance credit on Form 7200, Advance of Employer Credits Due To COVID-19. Employers, including tax-exempt organizations, are eligible for the credit if they operate a trade or business during calendar year 2020 and experience either: 1. the full or partial suspension of the operation of their trade or business during any calendar quarter because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or 2. a significant decline in gross receipts. A significant decline in gross receipts begins: • on the first day of the first calendar quarter of 2020 • for which an employer’s gross receipts are less than 50% of its gross receipts • for the same calendar quarter in 2019. The significant decline in gross receipts ends: • on the first day of the first calendar quarter following the calendar quarter • in which gross receipts are more than of 80% of its gross receipts • for the same calendar quarter in 2019. The credit applies to qualified wages (including certain health plan expenses) paid during this period or any calendar quarter in which operations were suspended. Qualified wages The definition of qualified wages depends on how many employees an eligible employer has. If an employer averaged more than 100 full-time employees during 2019, qualified wages are generally those wages, including certain health care costs, (up to $10,000 per employee) paid to employees that are not providing services because operations were suspended or due to the decline in gross receipts. These employers can only count wages up to the amount that the employee would have been paid for working an equivalent duration during the 30 days immediately preceding the period of economic hardship. If an employer averaged 100 or fewer full-time employees during 2019, qualified wages are those wages, including health care costs, (up to $10,000 per employee) paid to any employee during the period operations were suspended or the period of the decline in gross receipts, regardless of whether or not its employees are providing services. Impact of other credit and relief provisions An eligible employer's ability to claim the Employee Retention Credit is impacted by other credit and relief provisions as follows: • If an employer receives a Small Business Interruption Loan under the Paycheck Protection Program, authorized under the CARES Act, then the employer is not eligible for the Employee Retention Credit. • Wages for this credit do not include wages for which the employer received a tax credit for paid sick and family leave under the Families First Coronavirus Response Act. • Wages counted for this credit can't be counted for the credit for paid family and medical leave under section 45S of the Internal Revenue Code. • Employees are not counted for this credit if the employer is allowed a Work Opportunity Tax Credit under section 51 of the Internal Revenue Code for the employee. Claiming the credit In order to claim the new Employee Retention Credit, eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns, which will be Form 941 for most employers, beginning with the second quarter. The credit is taken against the employer's share of social security tax but the excess is refundable under normal procedures. In anticipation of claiming the credit, employers can retain a corresponding amount of the employment taxes that otherwise would have been deposited, including federal income tax withholding, the employees' share of Social Security and Medicare taxes, and the employer's share of Social Security and Medicare taxes for all employees, up to the amount of the credit, without penalty, taking into account any reduction for deposits in anticipation of the paid sick and family leave credit provided in the Families First Coronavirus Response Act (PDF). Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200. Page Last Reviewed or Updated: 07-Apr-2020 Employee Retention Credit _ Internal Revenue Service.pdf

I work with rental properties all the time. I have to agree with Catherine. The floor replacement is a repair to return the floor to usable condition. if the original floor were a vinyl floor and replaced with a hardwood, then the difference would be capitalized as an improvement. No 179 deductions are permitted with rental property. De-minimis the water heater as suggestion. Take the bonus depreciation on the fridge.