Christian

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 !

I have taken on a client who has a Foreign Tax Credit from 2021 which he had to carryover to this year. I looked to see if I might place it on Schedule B of the 1116 as a carryover but do not see an applicable line. I can count on one hand the number of Form 1116s I have prepared. The amount involved is some $347. His info indicates none of his funds had any Foreign Tax taken out in 2022. I am just wondering if I may put it on Schedule 3 of Form 1040 on line z identifying it as a carryover from 2021 ?

Just sent in my first efiles and this popped up after they were federally accepted. On transmitting the state efiles a blurb popped basically explaining the efile setup. Is this what the Accepted With Messages is referencing ?

It's not as worrisome as it may seem. He has a seasonal lawn service business. He totals his Form 1099s he receives from the business customers he serves. He adds a figure in on any other income. His expenses are basically receipts for gas, oil, materials used, and depreciation on his equipment. His problem if one should arise will be claiming his son which I have repeatedly advised him of. The Service does not specifically rule out a notarized affidavit but whether it would satisfy them is open to question. He's one of our southern good ole boys whom I will miss but age curtails everything.

Keeping up with client's social lives is not something I get into. A relative of his came in and sorta updated me I guess one might say. I have had extensive conversations with his wife as well over time. I have pretty much decided since I am gradually leaving the business this 2019 return will be my final work for him. Essentially I am keeping the ones I want and doing what most of us do at this point in my practice and make tax time much easier. Your input is as always is appreciated.

I accidentally sent this off before finishing it and editing. As noted she provides a notarized statement attesting to the son living with him. I this go around again reviewed this with him and he advised " I ain't worried my wife will swear to him living with me". I note on his return on line 5 of Form 8867 Notarized affidavit from wife and the Service has yet to raise any questions. And now he is off living with his latest femme fatal on a local lake. Some guys have all the fun.

I hate to be the skinflint in this discussion. Yes his Social Security tax was paid. By folks like you and me my friends and when he draws those soooooo sweet benefits his out of pocket contributions will for the most part been 0. There is not the shadow of doubt in my mind judging by his lifestyle he has unreported cash income from his business. He and wife are separarted for years but have a now 13 year old son who likely lives with Mama who has her mother living with her and so can claim HOH without the son. Every year she provides a signed nnotorized document attesting that son lives at dad's home even though I have repeatedly requested a better form of proof of residence.

His Earned Income came in at some $12,000 or so dollars. His status is HOH which eliminated any income tax. His EIC and Refundable Child Credit was greater than his SE tax.

I have his 2019 return prepared and he is coming to collect and file. He never owes and in point of fact has paid no Social Security tax for as long as I have been doing his returns. The Earned Income and Child Credit has caused him to owe nada so any benefit he will get will largely be one he has largely never funded. As Jackie Gleason famously said "How sweet it is" !

A client age 61 is considering applying for his Social security benefits at age 62. He is currently three years in arrears on filing his federal and Virginia tax returns having yet to file for 2019, 2020, and 2021. I told him he needed to check with the Social Security Administration as my thought would be they likely would not compute his benefit lacking any unfiled tax returns due for prior years. Does anyone know if this is correct ? He was of the opinion they would compute his benefit with the available filed returns and then adjust his benefit after he caught the arrears up.

My expectation is the daughter has made over $25,000 at her job and likely is taking a single class at the local community college which will sort the issue. Parents being parents really hate giving up their dependency exemptions but all good things must eventually end.

I am going to call in mom and have an extended chat. The daughter prepared her own return last year but did not claim the dependent exemption. Now she and mom are not getting along very well so it clearly is time to get a firm reading on this one. Thanks.

A divorced mother has a daughter now twenty years old in 2022 who I have shown as a student and allowed the mother to claim as a dependent. She was studying through a local community college and in discussing this with her mother my understanding was she was taking courses which would obtain a degree. Now two years in and no associates degree from the college. The mother cannot advise if or when she will get a degree only that she is still taking a course. The daughter is now fully employed over twelve hours a day at a local restaurant. Income from this job will clearly exceed the limits on the dependency exemption. I have asked about tuition expenses over time only to be told they were fully covered as the daughter was studying from home due to covid-19. I am going to ask to see the daughter's W-2 as I feel her income will be greater than any support provided by mom. My thinking is she no longer qualifies as a dependent on her mother's 2022 return but any input is appreciated.

Aye there's the rub. The mother has no income or so I am told. I was hoping to save some of the standard deduction she and her husband both of whom are over 65 had by using the HOH status. Well with single she will at least retain the credits.

A couple I have assisted for many years has contributed over half the support for two grandchildren who live with their mother at another location. She signs over the dependency status to them each year and they get the $500 per child credit for other dependents. The husband died in August 2021 and the filing in 2022 was their final mfj return. I planned on filing her as hoh this year only to read that the grandchildren must reside in her home for over six months to claim this status. Noting that if the dependent was one of her parents not living with her for which she supplied over half the support she would qualify as hoh. Am I reading this correctly or is their an available exception for grandchildren for which a grandmother provides over half their support ?

Sure am glad I asked the question. Margaret can you access the QCD screen from the 1009-R entry form ? That will solve the problem I am sure.

A client has chosen to donate a portion of his annual MRD from his IRA account to charity. Will the fiduciary indicate this on his 1099-R form for the year ?

The Earned Income Credit for older single workers available for 2021 returns did turn out to be a one trip pony. So now older workers who likely could use the extra help will be assigned back to the scrap heap.

I have looked to see if this provision is included in the recently passed bill but I do not see it. The increased Child Tax Credit failed to make it so this one may have fallen through the cracks as well.

Pretty obvious. I recently got a client whose taxman left our community some 30 or so years ago relocating into the Richmond area. He came down with covid-19 and she needed help likely for 2022 only. She advised he did not efile which occurred to me as quite odd. That is until I saw the prior year return with no signature or any indication it had been professionally prepared only the two word notation in the preparer field denoting it was prepared by the taxpayer. He has likely been getting away with this for years with no none ever turning him in.

Since his deduction would be $10,000 are you saying to prorate this amount? I would assume they would accept a proration of the percentage of his AGI that is applicable to his investment income. I wondered about that but he will not be able to use Schedule A hence my thinking the taxes would be excluded from deduction. This is one of these rarely encountered items I infrequently run into and luckily I don't.