Steve M

Clients mother died. Only income were several 1099R's, which I placed in Other income on 1041, line 8. But she owned and lived in a house which was sold in 2009 (after her death) for $115K. How is that handled. Does she lose the Sec 121 deduction because she died? Do you include the gain from the home sale on Sch. D of the 1041? Appreciate your input.

SteveM

Thanks, now that you identified it, it comes back to me. Really appreciate the help.

SteveM

Deduction for repayment of amounts under a claim of right if over 3,000.00 Claimed as Misc Itemized Deductions Not Subject to the 2% limitation. Page 4-23 Taxbook. Also see Tab 3. page 3-21 "repayments". For detail.

I'm sure it's also explained in Pub 17.

You have a choice of Sch A, or Refigure tax from the earlier year without the income that was later repaid. Subtract the regfigured tax from the tax shown on the original return. Enter the result on line 70, form 1040and enter IRC 1341 next to line 70.

Taxtrio

Client has received disability from private insurer for 3 years. Social security decided that she is truly disabled and now paid her in one year all disability payments going back 3 years. She had to pay back insurance company an amount equal to the social security payment. I can't remember how to account for this on tax return. Seems like there were several options, but can't find any info on it. Can anyone help?

SteveM

My client gave me a SSA 1099 and box 5 shows a negative $1200. He supposedly received some incorrect social security payments years ago and the IRS or SSA is taking it back $1200 at a time per year.

How do I show this on the return. Is this a reduction in income, and if so, where do I show it?

Steve M

I can't find the answer to this anywhere on IRS.gov or in the 1345 handbook. If a dependent is claimed on parents return, but wants to file to get withholding back, can you e-file the dependents return? Will it reject for SS# used on another return?

I don't think it will be a problem, but I can't find an answer. anyone know for sure?

Tom

Lodi, CA

No problem. Just prepare a return for the dependent and do not list him as claiming himself. No exemptions and he remains a dependent on his parents return. Depending upon the amount of earnings, he may owe more tax than if he claimed himself, but it will ususally save the parents more on their taxes.

Steve M

Thank you KC for your response. I saw the "reasonable" in the rules, but felt it was too good to be true. But what you said makes sense. Thank you again.

Steve M

Your client is OK. Here is what the IRS says about co-owners:

If two or more unmarried individuals purchase a principal residence, the credit may be allocated among these individuals in any reasonable manner. A method is reasonable if it does not allocate any portion of the credit to a co-owner who is not eligible to claim that portion of the credit. Reasonable methods include allocating the credit based on the taxpayer's contributions towards the purchase price of a residence as tenants in common or joint tenants, or allocating the credit based on the taxpayers' ownership interests in a residence as tenants in common. If an individual is eligible to claim the entire allowable credit, it is also reasonable to allocate the entire credit to that individual. Notice 2009-12, 2009-6 I.R.B. 446.

EXAMPLE 1: Dan contributes $45,000 and Brian contributes $15,000 towards the $60,000 purchase price of a residence, with each owning a one-half interest in the residence as tenants in common. The allowable first-time homebuyer credit is limited to $6,000 (10 percent of the purchase price). One reasonable method to allocate the credit would be to divide the credit based on their contributions to the purchase price: $4,500 to Dan and $1,500 to Brian. Another reasonable method would be for Dan and Brian to divide the credit based on their ownership interests, with each claiming $3,000 of the credit. If Dan is ineligible to claim the credit because he is not a first-time homebuyer, it may be reasonable to allocate the entire $6,000 credit to Brian.

EXAMPLE 2: Jillian contributes $75,000 and Krista contributes $25,000 towards the $100,000 purchase price of a residence, with each owning a one-half interest in the residence as tenants in common. Jillian's modified AGI is $100,000 and Krista's modified AGI is $60,000. Because Jillian's modified AGI exceeds the $95,000 cap, any portion of the credit allocated to Jillian would be reduced to $0. However, Jillian and Krista may allocate the entire $7,500 credit to Krista.

Client is a single male who purchased his house last week. The bank would not finance him without his parents being on the loan. However, he is telling me that his parents are also on the deed (required by the bank) even though they live in their own home. Does that mean that he can only claim 1/2 the new home buyer's credit? That is what I think will happen, but wanted to get another opinion from someone else.

Appreciate your thoughts.

stevem

I have a client who just handed me a brokerage statement with almost 125 options trades for 2008. Is there an alternative way of recording these transactions besides putting them individually on the Schedule D? The statement shows the total gain for the year (all short term) and I know that options transactions information is not provided to the IRS, so I wondered if there is an easier way of doing this?

Steve M

I have been using ATX for quite a few years. However, recently a client asked me where the state income tax he owed and paid in 2007 showed up in the 2008 Schedule A. I was flabbergasted to see that it was not automatically rolled over from the prior year. I called ATX and they said it does not roll it over; you have to input it manually because they don't know if the client actually paid the taxes owed?!? I can't believe it; am I the only one who is this naive to believe that the software did the rollover? I have spoken with other tax preparers and their software does it. Is everyone using ATX aware of this? In other words, you must look at the previous year's taxes to see if they owed any state income tax.

ATX doesn't issue a manual anymore, but looking at thier old manual, no where's does it mention anything about owed state income tax. If there are limitations in the software, shouldn't they let us know? I guess I can't believe this situation is real.

SteveM

If you go to the asset entry form, and go to the disposition tab, it should take that to the 4797, automatically, with the info. You don't need the 8582 when it is a total disposition, because the loss is no longer limited. And checking the box at the top of the E for total disposition should bring the suspended loss over.

Thanks for the response KC. I never noticed the box at the top of Sch. E before. There are so many features in the software that most of us don't know about. Thank you for letting me know.

Steve M

I agree Terry,

I would love to see that show up in the return manager as well. Virtually all my clients e-file and now I have to print a report of all clients and check that against the e-files. It would be nice if there was a check box that automatically showed e-file transmitted. From that list, it would be simple to determine if they are held, rejected or accepted. Hope ATX will consider that.

Steve M

Client's rental property was forclosed on. He did not receive a 1099c so he is still liable for the mortgage. However his fair market value is much lower than his purchase price. In essance, he has a substancial loss, plus prior unallowed passive losses. Instructions for form 8582 state that if you have a complete disposition, not to use form 8582 and to show the entire losses including prior unallowed on 4797. My question is how do you show that on 4797. There is no place to add in prior years losses. Do you subtract them from the FMV? Also 8582 automatically populates the info for the property. Do you remove it manually from the worksheets?

Appreciate your reponse and help.

Steve M

Quickfinders All States; PP PA-1 Pennsylvania:

Residents are subject to Pennsylvania personal income tax on their entire incomes. They may qualify for credits against tax paid to other states on income earned outside of of Pennsylvania.

Thanks Marilyn, that makes a lot of sense. Appreciate the response.

Steve M

My client lives in Pa but was sent to Washington State (no state income tax)to work most of the year. He never lived in Wa., but flew back and forth each week from home. His W-2 shows all of his income is from Pa. He is trying to convince me that he doesn't have to pay state income tax to Pa because the income was earned in Wa., and since Wa. has no state income tax, he doesn't have to pay any state taxes. My experience has been that your resident state may give you a credit for taxes paid to another state while a resident of your home state, but they want their pound of meat. Anyone have any input, especially as it pertains to Pa? Your thoughts are appreciated.

Steve M

Have an s corp client in Arizona. I can prepare a Fedeal e-file for the Corp, but can't find any e-file forms or info on e-filing for state (s-corp). Does anyone know if Arizona is set up for e-filing State Corp returns?

Thanks,

SteveM

One exclusion for debt forgiveness is qualified real property business indebtedness (other than C Corps). I believe that is referring to forgiveness of debt on real property owned by the business (real estate). Would this exclusion also apply to rental property? I am assuming that cancellation of debt on rental properties is taxable, but wonder if some of you have some experience or opinion on the matter.

Steve M

Thanks for your replys. Makes logical sense; guess that was what concerned me.

Steve M

My client's 12 year old daughter died in March of 08. She is a single mom. I can't find anything in the instructions for a deceased dependent.

Can Mom claim HOH for 08?

Can she claim her daughter even though she was alive for only 3 months? Logic tells me yes, but I can't find it.

The software under dependents only allows me to enter deceased if there was no SS #.

Appreciate your input.

Steve M

Thanks for the replys. Make perfect sense.

SteveM

My client's 12 year old daughter died in March of 08. She is a single mom. I can't find anything in the instructions for a deceased dependent.

Can Mom claim HOH for 08?

Can she claim her daughter even though she was alive for only 3 months? Logic tells me yes, but I can't find it.

The software under dependents only allows me to enter deceased if there was no SS #.

Appreciate your input.

Steve M

My client had a C corp and filed for an S corp election the second quarter of 2007. (He has an extension for 2007 so I have not filed for him yet) In July of 2008 he received a notice from IRS granting him S Corp status effective Jan. 9, 2007.

My question is do I file his return for 2007 as a C corp (what it was at the beginning of the year) or as an S corp which it was after Jan 9th or do I have to file both a C corp for 9 days and then an S Corp.

Keep calling the IRS business line and continuously get disconnected so hope one of you knows the answer.

Thanks,

Steve M

I just returned from vacation and saw tht ATX is re-opening it's community board. My question is are most of us going to use it or stay here? This has served me well; are most of you staying here? Guess I'm still a little gunshy, but my wounds are still healing.

SteveM

I have an opportunity to expand my business as another preparer in the same building wants to sell his business. He has been established for quite a few years and wants to retire. Has approximately 300 clients.

Any suggestions as to how to value the business so I can make an offer?

Steve M

Anyone from California may be able to answer this question. I am an Az preparer and have been doing taxes for an individual in Ca for several years. He recently received a notice from Ca that he owes a bunch of money bacause the Ca sch D is not to be used for Ca residents with capital gains. All of his stock sales populated to that form and were removed from Ca income. I assumed I had opened that form in error.

Now I did a return for a retired individual who moved to Ca from Az, and it still opened automatically. Is it supposed to or is this an error that ATX should correct? Would just like to know.

Steve M

Husband and wife formed an LLC and purchased a piece of expensive land to develop. Do to the R E Market, they can't go forward and want to sell the property. Since the IRS has passed a ruling allowing husbands/wives to file individual respective Sch C's instead of 1065's, I wondered if that might be a simpler solution. They have no income from venture - only carrying costs, mostly interest and taxes. Wouldn't it make sense to put the interest on the 4952, and the taxes on Schedule A. The value of the land doesn't seem to belong within the Sch C unless they developed and sold a parcel. But I feel like I might be missing part of the puzzle. Have any of you had this kind of experience?

Thanks,

Steve M