Christian

Some time back Kiplingers advised that compulsory education requirements for practitioners were being considered for inclusion in the new tax legislation being considered. I am happy to hear that this died in committee. I get enough education without being forced to sit through some redundant unneeded stuff although I may inadvertently dent the regs a time or two.

I agree with Gail. I would have not filed a Maryland return. To me the fact it was deducted there is irrelevant. The funds were constructively received by the taxpayer as a resident of Virginia and the only tax due would be Virginia state tax. Whether the Department of Taxation will raise an issue over this is an unknown. If they think they can squeeze an extra dime out of the taxpayer they will try. Sometime back I had to email my state Senator to get a small refund due on an amended return as I had not heard from them in some six months.

Are any of you noting an increase in errors made by the Service of late? A client of mine was sent a $1,000 refund he should not have got only to get a send it back letter a month or so later (of course by then his wife had spent it !). I discussed the problem with another client's 529 plan issue in an earlier post. Another non client approached me because her husband had died in 2015 which was duly indicated on her 2015 joint return. On filing her single return in 2016 the Service sent a letter advising her she was deceased so she had to go to the local Social Security office to provide proof she was still living. To date she has yet to receive her refund while they get this sorted.

I have to agree Abby. I never thought of a sole proprietorship as being a pass through entity. I like my profit to pass directly into my pocket.

I just knew it was too much to hope for.

Once passed I will need to review this carefully. For Schedule C filers I am wondering if the 20% is deducted from the Schedule C. I rather doubt they will allow this as the owner would also reduce his SE tax on the 20%.

How do you get Kiplinger's for free I do wonder?

From news accounts it now looks as if the Individual Mandate soon will be history. No more scratching about to come up with an exception that fits. What a relief !

Surely y'all jest. IRS publications are so edifying and stultifying. Not to mention mesmerising.

Happy Thanksgiving to all and especially those who have assisted me with some of my more creative tax ideas ! Oh, my client got his college credit after my herculean efforts.

Kinda looks like you solved my problem Gail. Oh me, let's see a single federal return, a married filing separate Virginia return, a married filing separate New Jersey return. Hmm, I see the billable hours rising upwards . Clearly his marriage will produce unexpected benefits. It has come to light she is a care giver to her aged mother and wants mom to come south as well. Ah, the joys of newly wedded bliss. Thanks again. It's so great to have a fellow Virginian to help me out with these occasional head scratchers.

A bachelor client who is 47 years old had a mental storm of some sort and decided to tie the knot this year (2017). Ordinarily this is no problem but yesterday I learned his beloved who is a New Jersey resident (my client along with me are Virginia residents) has not moved to the Old Dominion as yet and will not likely do so for the foreseeable future. He trots up some six hundred or more miles every third week or so to abide with his beauty. This will mean when they file in 2018 there will be a question as to how they will file their return. She has contacted Social Security and changed her name to her new married name. In Virginia our surrounding states are given reciprocal rights which allows the use of taxes paid in another state to be used on the Virginia return. I have yet to check this but I doubt New Jersey qualifies. Having not encountered this exact situation before my initial feeling is that they should file MFS. This is not advantageous but for now I see little alternative. Any input would be appreciated. It's a long time before he files next year but having this tied down before then is for me a good idea.

Assuming you do not tax $5,000 or so earnings in the account he still has some $7,000 dollars or so of fully taxed basis applied to the tuition. Why would this not qualify for a credit based on $4,000. I see no difference between that money and money he might have paid out of post taxed wages or pension income for that matter. If the credit is based only on after tax money surely his basis will qualify ? Of course, no one ever said our beloved tax was simple.

Alas. To quote the immortal bard "One more time into the breach dear friends" or something to that effect . The tuition was $13,900 and the 529 distribution was $12,100 all applied to the tuition. Subtracting $4,000 form $12,100 leaves $8,100 . Since the credit is based on $4,000 surely he qualifies for it would you not think? For future reference I will require more info from clients should this recur. I do mostly older folks and my experience with this particular credit was likely not what it needed to be although I read the relevant material but as sometimes happens I must have missed something. I have already contacted my client and advised him to have the university business office supply him with a breakdown or statement showing that the 529 distribution was fully applied to his tuition. Lord ! What I now need is a vacation in Tennessee where I can recover from this matter.

On a day like today I feel like taking out my trusty .38 and relieving myself of all my client's future tax woes .

We will see how it plays out. I sent the Service copies of over $9,000 in personal checks made payable to the university. Since this was out of his pocket and is not identified as to what it paid for it may resolve it altogether. Otherwise we will just have to get the university to cough up some additional info. Between tuition and room and board the client coughed up some twenty two grand in all. So if we need to argue about it we can. This may be my last ed credit . In point of fact he entire 529 distribution (earnings and basis) were used to pay tuition which amount was greater than the entire distribution.

I think I got this resolved. It seems to me the university by reporting the tuition amount as billed in box 2 of the client's 1098-T instead of showing it in box 1 indicating it as paid caused this problem. In any event the client had enough money in basis in his 529 distribution which was paid toward tuition to qualify him for the credit. However, knowing the Service they may yet ask for more info. To be brutally honest this whole matter smells of a fishing expedition on the part of the Service but time will tell.

Thanks Catherine I may have to ask the client to obtain that from the college.

Thanks to all for your replies. The client produced his Form 1099-Q from his 529 plan. The funds were a direct transfer from the plan to the university. The university had reported the tuition CHARGES on line 2 of the Form 1098-T (my mistake) hence the IRS did not know if that amount had been paid by the client. We are sending them a copy of his Form 1099-Q and a cover letter. They may come back and ask proof that the funds were paid for tuition which since the tuition charges were greater than the amount paid by the plan I would not expect but knowing the Service I am preparing for that possibility. I will need to make sure any Forms 1098-T I get in future show the amounts in box 1 or this will likely happen again. Whether a college will cooperate with such a request is another question.

The summer has been blissfully uneventful until now. A client has a daughter who has been in university for three years. I computed the American Opportunity Credit for him as I have done for the prior two years. He just received a notice disallowing the entire credit until he can show proof that he and wife paid the tuition and related expenses to the university. The university sent him the required Form 1098-T with box 1 clearly showing what amount was paid. He has cancelled checks for part of his daughter's expenses but much of her tuition was paid directly from a 529 plan which he paid into for her over a number of years. I am wondering if a letter from the university verifying that the couple paid them the amount indicated in box 1 of the form would suffice. Any info would be appreciated. He has checks for an amount much greater than the $4000 allowed for computing the credit and I am wondering if this would do the trick as well.

A male client decided to marry in 2016. He and his now spouse decided to buy a new home and sell the two homes they had owned as single individuals. She sold hers last year and his is up for sale. My thinking in respect of the tax exclusion on these homes is that each one is entitled to the $250,000 exclusion. His former home is titled in his name only. What do y'all think?

My reading is they will refund the full fee to all who paid it. If memory serves me they did not appeal the RTRP ruling but I may be wrong. They did fully refund the test fee. It would be a strange feeling for me to receive a check from the IRS .

Nope Forbes.Com. My guess they will appeal so they likely won't refund for ages.

It was posted on Yahoo News and was published in today's Forbes Magaizine.

Well the Service has lost another one in federal court. All PTIN fees will have to be refunded. I figure I've paid almost $400 since they were imposed in 2010. Hope I live long enough to get it back !