Christian

There is a follow on to this in that he died this year she intends on filing mfj for 2023 which would perhaps create a problem as well.

An individual came in who has used one of the large franchise tax preparers for a long time. Her late husband cashed out a large balance from his 401K placing the cash in a savings account. He had taxes withheld as it turns out clearly not enough. He died unexpectedly in January of this year. An attorney who is assisting his wife settle his estate (he died intestate) advised that since a large state and federal tax were due on the distribution she could file as married filing separate and since he was no longer here to pay the tax she could not be held liable for them. Her preparer at the local franchise advised that this was not correct and prepared her return as married filing jointly with her liable for the unpaid tax on her husband's distribution. I backed away from this one as frankly I do not know the answer. What do y'all think ?

He evidently forgot or was unaware of the limitation on rental loss that is to say the $25,000 limit. Apparently the software used and I did not inquire which company did not evidence any warning with respect to the limit. I'll see about the transcript and probably will end up amending his return explaining he will need to pay some additional tax and preserving the overage for a later year. He has other investments which he ought to be able to subtract the loss from. Many thanks. .

I did not ask. He is going to bring me the return. I made a similar error some years back but caught it myself on reviewing the return. Sorry to say ATX did not signal that anything was incorrect. Of course he has two properties and I will need to check and see if the loss is applicable to each individual unit. I do very few rental returns and the ones I do primarily show small profits each year.

An individual has come in who owns two rental properties. He actively manages them but in doing his own returns last year mistakenly deducted more than the $25,000 loss deduction. I have not seen this before and frankly do not know how to address this. I suspect the Service will note this and send him a correction notice disallowing the part of the loss over $25,00 and refiguring his liability. I assume they would allow him to carry forward any disallowed loss.

I received this from a member of the Department of Taxation through a request submitted to them to assist in clarifying this matter. They apparently have posted a FAQ on this issue on the official website because of the large numbers of requests. For my money if they get the Defense Finance and Accounting Pension it's good enough for me. Directly below is her response. This is not directly dealt with in the FAQs, but it is sort of indirectly dealt with. The FAQs say that only these types of military benefits are eligible if the other requirements of the subtraction are met: Military retirement income received for service in the Armed Forces of the United States; Benefits paid to the surviving spouse of a veteran of the Armed Forces of the United States under the Survivor Benefit Plan program established by the U.S. Department of Defense; and Military benefits paid to the surviving spouse of a veteran of the Armed Forces of the United States. With regard to the above, because the Armed Forces of the United States would include the Virginia National Guard, this would include military pension benefit received by a National Guard member from the federal government. However, it would not appear that active military would generally be receiving this type of income, which is for retirees and their surviving spouses. Personally an OPM pension alone would not cut it for me as it is widely received by other federal employees.

Regrettably one of my clients passed on last year. Her son is her executor and will sign the Form 1310 attached to the return. A question was raised as to whether he needed to sign the signature line on the second page of the Form 1040 and if memory serves he does as executor as he does on the Form 1310.

Worked like a charm. A simple error in interpreting data entry. Thanks for pointing out my mistake.

Well it is not beyond the realm of possible that I placed the wrong entry in box 2a. I put the adjusted taxable amount in box 2a that is the IRA full distribution which was fully taxable minus the QCD amount. Perhaps I should have entered instead the full amount as reported on line 2 and then the QCD as reported in the line reported on the bottom of the input screen will do the rest ? I will go back and try this and see.

On preparing a client's return who used a QCD through his IRA account I find ATX populates the Form 1040 correctly only to refuse to prepare an efile because the taxable amount is not placed in box 2a of the input form. If you place the taxable amount in the box or zero it throws the calculation off on the Form 1040 or will not show QCD on the 1040 at all. I contacted ATX tech support who acknowledged a problem with this. You can mail the return in but the software will not prepare the efile. There is the checkbox indicating a QCD was taken and the amount given which I filled out but all to no avail.

Well as a last full measure of my devotion to our work I again called Senator Bryce's office in Spotsylvania who after a lengthy discussion with his aide decided that any service veteran paid with a pension from the Defense Finance & Accounting Service qualifies for the benefit which oddly enough is passed on to their spouse after the veteran's death. Actually Gail retired Virginia National Guard members do in fact draw a pension from the Defense Finance & Accounting Service. It reads as follows Defense Finance and Accounting Service and in the second line just below U. S. Military Retired Pay.

Well take your pick. A legislative aid to one of the bill's sponsor called to advise that members of the National Guard are not covered by the benefit. My own state senator called to advise his reading of the law means it covers the Guard veterans as well. If the Department of Taxation wants to split hairs over this they will likely need to contact every individual availing themselves of this benefit and obtain from them proof of their former military status. Very unlikely.

Well you are, of course, correct. Well I called and his mail box is full. Go figure. So I called my state senator whose legislative assistant is calling Richmond to see if she can get clarification. If I hear back i will post.

And there you have it in a nutshell. What is to be said if an employee of the Virginia Department of Taxation herself cannot address this. I'll call an office of one of the state senators sponsoring the d--- legislation. Oops did I say that ?

A new benefit for retired military members allows them to deduct up to $10,000 from their military pension benefits on their Virginia returns for 2022. The amount increases in later years. I have interpreted the law to be inclusive of veterans of the active military as well as National Guard members as both receive pensions from the Defense Finance & Accounting Service. Someone questioned this. The benefit as written reads to me to make no distinction between Guard members and those from the active military. Sooooooooo I called the Virginia Department of Taxation this morning and was asked to wait until the responder could read the wording of the benefit. She replied that she was unable to advise whether it covered both Guard and veterans of the active military. How do those of you who are fellow Virginia preparers interpret the new benefit ?

Boy the lower AGI limit for the EIC is cutting no few folks out of this benefit or so it appears. I do not do many of these but for those few they have gotten an impact.

You know I should have had that thought immediately and realize that the health issue I am having with a severe cold has clearly caused a problem. However, I called the client as her hearing is not so good either and she had provided an incorrect date for occupancy of the home which eliminates any possibility of tax. Thanks for the input. Oddly the settlement agreement for purchase of the home years back had no date of settlement which occasioned this problem.

I have looked for the sheet to compute the portion of the gain which qualifies for exclusion in ATX with no luck and I suppose will have to use the one in Pub 543.

A client's husband died in August 2021. She sold their former home in February 2022 and moved to another locality. Much to my surprise they had lived in their former home less than the required two years so she gets a prorated exclusion of the capital gain she got. My question is this. She is a widow (no children) who sold the home within a two year period after her husbands death and of course had not remarried. Could she possibly use the higher $500,000 exclusion which even though a partial exclusion would cover her entire gain. This is likely a long shot but not the first I have attempted to assist my client ? She is filing as single for 2022 which probably cooks my idea.

Yes that is exactly what my instructions were.

A client who has always filed his taxes late has come in bringing his 2020 and 2021 info. I asked if he and spouse had received the EIP payments which most folks got. The reply was they had gotten none. Are these payments still available as credits on these late filed returns. I am wondering if the program has been closed out at this point. The husband is a one of a kind individual and stated flatly he did not care if he got the payments or not. He has for years left refunds on file with the Service to hold against any future tax payments. I am wondering if the Service may simply compute the applicable EIPs and send them to them. Would appreciate any thoughts as I am sorta lost in space on this one.

Well maybe not. The mother's name is shown on the withdrawal form. Usually a dependent's name is on the ones I have seen over the years. I have only the mom's statement as to how the funds were spent so I am leaving it up to the Service to decide if there has been a misstep.

Well that clarifies that.

The term non-qualified distribution is a better descriptive of this I guess. ATX does not make reporting this all that easy.

Another client made a withdrawal from a remaining 529 Plan she has saying it was used to fund her daughter's tuition expenses. Her daughter decided to claim herself last year and the distribution is (of course) shown payable to Mama. Unless greatly mistaken this is another forbidden transaction and Mom will pay regular and penalty tax on the earnings ?