Gail in Virginia

If he could be claimed as a dependent on someone else's return, I am not sure he qualifies for the refundable credit.

Thanks for posting that, Pacun. I have been having this argument with a client for a couple of years now, and this might just help. I don't what will explain it to the truck driver that just left that thought he should be able to deduct his blue jeans, because he only wore them to drive the truck. However, he had a pair of them on in my office, and he had not been working today....

After a Monday like today, McDonald's looks pretty good to me.

Myrtle Beach in July, but I am still hoping for something fun earlier - even if only a long weekend.

Client is sending his daughter to William and Mary, an inexpensive (!) little school here in Virginia. He withdrew funds from his IRA to help pay the expenses associated. Of course he is not 59 1/2. If he uses the exception for education expenses on his IRA withdrawal to avoid the penalty on part of the funds, can he still take the American Opportunity Credit for tuition and books he paid for? The IRA withdrawal is greater than the costs of her education that can be deducted, but of course they have hotel bills, and restaurant bills, and dorm fees and meal plans,etc. that he thought would be deductible because they were part of what it cost to get her to the college and keep her there. Basically, my question boils down to: Is it considered double dipping to use the same tuition expense for the American Opportunity Credit and to avoid the penalty on an early withdrawal from and IRA?

Good to know. Thanks, KC!

Yes, you are. There are so many variables involved - what will tax rates be? what will be deductible? what will their income be? All of these things affect how much this will cost them in the future. You can tell them what their taxes will be this year if they don't split it. You can even use the planner to make an educated guess, assuming that there are no major tax changes in the next two years and no major changes in their situation, about what it will cost them over two years. But unless you have a better crystal ball than I do, you can't be sure that your assumptions are correct and therefore you can't be sure that the projected taxes are correct. Take your best guess, client. :dunno:

Yes, re-characterizing it is the same as if he/she withdrew it and then contributed it for 2011. Bur remember, they have to withdraw the excess contribution and any earnings before April 18th. Depending on timing this might result in the earnings being coded as for the previous tax year which would mean they should go on the tax return you are currently preparing not the one next year. At least that is the way I understand that code on the 1099 they will get. That should not apply to Catherine's situation since the contribution was made in 2011. As far as Chowdahead's first question, if his/her modified AGI is 109,000 then he/she exceeds the limit by 4,000 you divide that by the 15,000 spread in the limit and multiply it by the maximum contribution (either 5,000 or 6,000) depending on his age. That will give you the amount the limit is reduced by for this taxpayer. Using your numbers I did not get the same answer when I hurriedly did the computation. BUT the AGI might need to be modified if he deducted student loan interest, foreign earned income, or several other things. Publication 590 has all the details.

I thought the exception codes for medical, education and first time home purchase only applied to IRA distributions. If this was a distribution from a qualified plan, which is what I understood from the language retirement plan, do those exceptions even apply?

One further reminder - points are deductible on the purchase of the home, but if it is a refinance, then they must be amortized over the life of the loan rather than deducted up front. But it sounds like from the original post that this is a purchase.

I think that I could come up with several pages of things I would change if I could, but being president does not provide enough power to change most of them. I like Jainen's suggestions for tax reform, but I think the first legislation I would introduce would be the Robert Heinlein Plain Speaking Bill: If legislation or regulation is not written clearly enough to be understood by someone with a sixth grade reading ability, it is not to be considered constitutional. It should not be so difficult to understand the laws that we all live under. And this would apply to tax law and regulation along with everything else. Heinlein had some other good ideas also, although some of them were mutually exclusive! And by the way, I think I would change the time one way or another and leave it - if you want to get up earlier in the summer, go for it!

If the garage is heated/cooled, I would be inclined to allow it as it will increase the efficiency of the building envelope. If the garage is not heated/cooled, I would think that the door between the garage and house would be the one that should be insulated.

Karen, I am sorry for your loss. I hope someone more knowledgeable than I about this will chime in. Is there a website that offers any information about the tax treatment of the amounts received for the class action lawsuits? The ones that I have seen this year have had that and I have found somewhat helpful information there. As far as the name problem goes, my guess would be to try Hernandez as the last name but I don't know that either.

Good job, Ken! Glad you were able to help Ken out. Once upon a time, this child would have qualified her for HOH, but that was before the Qualifying Child and Qualifying Relative rules were established several years ago. Could the other bus drivers have been in similar circumstances 10 years ago?

I assume this is the definition you mean My link and not the one listed in Wikipedia.

And I label everything possible also because it can affect the way the state income tax is calculated here in Virginia. We used to have a Married Filing Separate on a Combined Return filing status, which has morphed into the spousal tax adjustment and is dependent on both taxpayers having income. Therefore, it can be important to distinguish joint, filer and spouse when entering interest, dividends and stock sales. I had not even realized their was a diagnostic for this because I am so used to putting it in for everything.

Thanks for sharing this. It would be nice if IRS would make an official announcement, even if just to say they don't know when people will start getting refunds in this situation.

As I said, "This is an optional coverage that the employee pays for." The premiums were paid with after-tax dollars.

Client is an employee for railroad. He received a payment from United Transportation Union Discipline Income Protection Program. This program provides a set amount of pay while an employee is unable to work because of certain disciplinary charges. This is an optional coverage that the employee pays for. The payment is reported on 1099MISC in box 3, and a letter came with the payment explaining that it is not subject to self-employment tax and that payment should be reported on line 21 as other income. However, there is also a letter that gives the amount he has paid each year for this coverage. The letter also states that in furnishing this information they have no knowledge as ti whether or not he may have utilized any portion of the total amount. Even though the letter talking about taxes does not mention excluding this income, I am wondering if he can exclude it to the extent of his cost of the premiums. Any one have any experience with this, or opinions?

Margaret, the obvious answer is that their 2009 tax return was wrong since no rollover occurred that year. Therefore, the 2009 should be amended to take the rollover off. The taxes that were paid can be forwarded to 2010 tax return, where you will report the rollover normally. To me, the bigger problem is that they have non-deductible contributions with no clear trail of 8606 forms to show what was put in after-tax. Good Luck!

He lived in the US for the whole of 2010, and yet was considered a non-resident. I don't see how he could be a resident of Virginia if he is not a resident of the US.

That is going to be a bit tricky since when I try to add a second 5405 on ATX I get an error message that says the form may not be duplicated. :wall:

And when you fill out the 8948 for reason you are paper filing, you can put that the husband's name/SSN did not match IRS records and he refused to provide information regarding the problem. If you let him know that is the reason you are using, maybe he will cooperate. Maybe not.

I am a dilettante - I like to do a little bit of everything. Unfortunately, for the last few years I have been trying to work and go to school, so most of my hobbies have been abandoned. But when I have time I like to sew, embroider, cross-stitch, crochet, refinish furniture, latch hook, cook, and I want to learn to knit. But church activities take a lot of my time, and even though my son is no longer a boy scout, I am still active as a Merit Badge Counselor. And during tax season, who needs a hobby?

The break does not present a problem - that is why the law phrased it as "any 5-consecutive-year period during the 8-year period." However, from May 2005 until July 2009 is only a little over 4 years. They do have to own a home for 5 consecutive years sometime during the 8 years before the purchase of the new house.