Christian

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 ?

In the words of an elementary school classmate who was sitting at a piano recital in front of an audience with his mother beaming with pride. "It appears I have forgotten" meaning the piece he was supposed to play. He was summarily snatched up by his mother and quickly removed from the hall.

You are saying the total distribution of basis and earnings are subject to tax ? In Virginia contributions to 529 plans are exempt from state tax which will now be paid on the distribution but the basis was created from money originally taxed by the IRS. Isn't this taxing the same money twice?

A client came in with one of these but tells me using the reported amounts on the form have been waived for this year. I thought it best to post on this as I have yet to see anything on a waiver for forms received by taxpayers already.

Two of my clients have cashed out the remnants of a 529 plan which was established to pay for their child's college expenses. The child is no longer their dependent and they had the remaining balance distributed to themselves under their social security number. The form shows a basis number and an earnings number. I have oddly enough never had this to come up and most 529 plans are exhausted paying college tuition expenses. I would think the earnings amount should be added to their gross income but am not certain on this point therein lies the reason for my post.

That is also something I too have read. There is nothing on the form to indicate that any part of the benefits are nontaxable. I will assume that the premiums were fully paid by the bank she worked for. Well it was worth a try to help her.

A client was sick for an extended period and has received a W-2 indicating payment through an insurance carrier noting third party sick leave in the applicable box. I checked to see if this pay would be federally or state deductible or exempt but came up negative. Curiously the amount shown as wages in Box 1 are not the amounts shown in the Social Security and Medicare tax boxes 3 and 5. Somewhere along the line I read that sick pay is exempt from these for a time and thereafter subject to them. Would this account for the difference ? I was looking to see if any of the reported wages would be exempt from tax but can find none.

The vouchers on my program are showing on printing with no amounts shown. I can however print individual vouchers which show the amount to be paid. ?

After reading the comments I have decided to go ahead and file the return. She will in fact have that loss to carry forward and brokers being brokers this probably will not be the only trade effected in this account. As noted a trade may be profitable requiring a payment of tax.

Every now and again a client's income falls below the filing threshold. I normally advise them to not file for the year for a nominal fee. They can return each year to assure themselves that they do not need to file for later years as some do since nobody ever seems to recall I advised if their situation changed to come back in to check it. One such client came in this year and her income no longer exceeds the filing threshold. She now has a small brokerage account having been left an inheritance which she took to EdwardJones. The broker sold a position in the account losing some $1,500 which of course reduced her income. On reflection I can recall no rule which would require the filing of a return just because of a trade in a client's brokerage account unless it produced a result which helped carry the client income over the filing threshold. But I just might have overlooked one of those sneaky IRS rules requiring such a filing so I am putting this in for comment.

That was my reading as well. Since he took around $10,000 from his account I am assuming I would put the figure for example $3,000 on line 5. Place 5 as the exception on the exception used line on the front of the 5329 and the ATX software will compute the 10% penalty on the $7,000 unspent on medical expenses. Wallah !

A client who had large uncovered medical bills and was out of work for several months last year has now thankfully returned to health and work. He needed to tap an IRA account in order to pay for these. There is of course the medical exception on this form. My question comes down to this. Are the medical expenses he can use to qualify for the exception ONLY those which exceed 7.5 % of his adjusted gross income. I am assuming these expenses will be less than the $10,000 he took from his IRA account. Do you show those expenses on line 5 of the exception list ? Is the 10% penalty then computed on the remaining portion of the $10,000 which will not be covered ?

I entered the data and it populated the form but not the Form 1116 Alternative Tax version. When the foreign tax amounts are below $300 for singles and $600 for marrieds ATX posts them to the foreign credit line on the 1040. But his amounts come to $650 so no luck. The last thing I want to do is send them the form not correctly prepared.

A new client came in this year. He had two mutual funds which withheld some $650.00 in foreign taxes. I have no familiarity with Form 1116 having prepared one in many years. I called him and explained he would need to carry his info to someone else explaining my concern that I could not properly prepare the Form 1116. To my surprise he said just to forget it and not use it. As this form attempts to get some or all of these foreign taxes applied against any federal tax he may owe I am concerned it may be mandatory to use it. On the other hand since it could reduce his federal tax obligation I doubt the IRS would complain if a client voluntarily does not want to use it. I would appreciate any thoughts on this as I personally do not see any problem leaving it off his return. I searched through ATX to see if any detailed line by line instructions existed in our tax program but could find none. After examination of the input fields I surmised it would take a several hour course to fully understand how it is applied and I have no such time available.

A client's wife inherited a house which she and husband lived in for a number of years. They then bought another house and basically let family use the inherited one for a number of years. Last year she sold it and since the couple has not lived there in eight to ten years it cannot be sold as their residence. I will show it as an inherited house using the basis as of the date of her father's death and add any improvements made by them since he passed on. This seems correct to me but as usual any input is appreciated.

MANY thanks Abby as it looks like it will give them the credit. The form is a real labyrinth !