I would list the 401K dist as income and subtract as expenses the travel and court costs of the fiduciary.  The balance (if this is the only income and these are the only expenses of the estate) would be distributed to the beneficiaries on a 50% 25% 25% basis, assuming that the other two sisters compose the other 50% of the beneficiary list.  The personal expenses for credit card bills and TV are nondeductible expenses which should be withheld rateably from the PAYMENTS given to the beneficiaries but not the amounts shown on the K-1's.  The distributible net income should equal the income and the withholding will all be an overpayment to be refunded to the estate and then divided up among the beneficiaries.

If there are other income items or other deductions, the DNI may not reduce the income to zero or there may be a loss which will not be distributed to the beneficiaries until the estate is closed.

The Turbotax slogan "It doesn't take a genius" is really illustrated by some of the questions on their Turbotax (ttlc) live community.  If you ever need a good laugh, just shoot over there and look at some of the questions that are posted.  Today's favorites are these:

Thank you Roberts.  That was my thought also, but I appreciate the verification.  This is what makes this board GREAT!

I did not prepare the 706 but I have a copy of it.  Husband's estate was $5.1M.  The Trust document was a single trust for each spouse each showing the other as sole primary beneficiary, so the beneficent interest in the husband's now irrevocable trust is the wife.  While it will not be difficult to prepare a 1040 for the Trust each year and transfer the income to the spouse via the K-1, I am just wondering if there is any provision in the code for bypassing the 1041 paperwork.

Here is the situation:

The husband and wife separated their assets (stocks) and each formed a trust naming each other as sole beneficiary in order to maximize the Federal Estate Tax exclusion when either spouse died.

While they were both alive, the trusts were grantor type trusts and ignored for tax reporting purposes.

The husband died  Jan 10, 2015  and a 706 Form was filed using his individual entire Form 706 exclusion for his Trust, which then became irrevocable.

My question is, does a 1041 form get filed every year for this Trust in addition to the wife's 1040 form to transfer all of the dividends, capital gains, etc to her personal return or is there anything in the regs. (have not found anything so far) that would allow the wife to just report the income from the Trust accounts on her personal return as sole beneficiary (as was done by the family when both trusts were grantor trusts and revocable before husband's death) without having to file a 1041 each year?  The basis of all assets in the Trust have already been stepped up to DOD value.

I believe it is because if she claims "Married" the withholding calculation is based on the Married Filing Jointly tax brackets rather than MFS, so she goes into the higher brackets twice as fast as MFJ and even the additional dependent is not enough to recitify the situation.

Thanks Danrvan.

I am basing my decision on the following:

1.  The spouse is gainfully employed ($4500)

2.  Some of the days the child is in preschool correspond with the days the spouse works.  On the others she has to put the children in daycare outside the home, which she does not claim because she is already at the max for day care expenses.

3.  The IRS example from the regs stated below:

Part-time work. If you work part-time, you generally must figure your expenses for each day. However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. Any day when you work at least 1 hour is a day of work.

Thank you all.  Gail and Rich, you have convinced me to take the credit.

Thanks Judy.  In looking up the examples, I found the following which seems to allow the credit in this case, even though the wife only works on a few of the days during the year when the day care is provided.

Part-time work. If you work part-time, you generally must figure your expenses for each day. However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. Any day when you work at least 1 hour is a day of work.

So I guess I can use the expenses for the full tuition even though the wife only worked on about 8 or 10 of the days the dependent was in the preschool.  It just seems to violqte the spirit, but not the letter, of the code.

I Thought so too, Lion.  Everything I find only talks about qualified income and qualified expense, but I have not been able to find any cite referring to the requirement that the wages are earned on the same days as the child care expenses are incurred.

My client is a doctor and his spouse a nurse.  She works one day every other week and earned about $4500.  One of their two children attends a preschool 4 days a week

with tuition of over $3000 for the yer 2015.  The child, however, does not attend the school on the days the spouse works as a nurse.  Also, the other child is still at home being cared for by the wife on the days that the older child attends the preschool.

On the surface, the taxpayer and spouse seem to qualify for the child care credit on Form 2441 since they paid the qualifying organization $3000 to provide day care, both spouses worked during the year for parts of all 12 months of the year, the spouse with the lower W-2 income earned more than the $3000 maximum paid for the day care, and the child was a qualifying dependent.  The only thing is, that the day care was not on the days the spouse worked.

Am I overthinking this?

I just received a notice from my broker (Stifel Nicolaus) that they "have been granted an IRS extension of time to issue 1099 to recipients."  Then it goes on to say that

"your 1099 information will be processed the beginning of March and is currently scheduled to be postmarked by March 15, 2016."

Has anyone else received this type of information from any other brokers?

The extension will put most of my clients back about a month from when they ordinarily file and cause a real traffic jam between 3/15 and 4/18.

When you input the K-1 from the 1120-S into the individual's 1040, you can check the box underneath line 1 on the K-1 input form which says "check if materially participated in business activities."  With this box checked it will show the loss as non-passive.  BUT This would imply that the loss did not exceed the T/P basis.  What I have done with clients in the same situation as your client is show the accumulated loss which has been suspended in a supporting statement for line 1 of the Schedule K-1 and show the amount of loss on line 1 as "0."  Then, in years with a profit, show in a similar supporting statement for line 1 on Sch K-1 the calculation as to how much of the profit is offset by suspended losses from prior years and report that amount on the schedule K-1 on the 1040.  

I have been reporting the profits/suspended losses on one client's return for 11 years without any problem from IRS.

But then again, in the words of Intuit, "It doesn't take a genius..."  LOL

I just discovered the missing client information feature in ProSeries even though it has been around since at least 2014.  If a client is missing an item, such as real estate tax or mortgage interest or a dividend, you can just right click on that line item on the form and it automatically transfers that line item and description to a missing information list which can be printed or e-mailed to the client.  Also, you can change the description of each missing item to make it even more specific such as "interest income from Chase bank."  When the client has a missing information list, a red exclamation point appears in front of the client name in Homebase and also the missing information form opens up when you open the client.

Each missing item has a checkbox in front for the preparer to check off when the item comes in and, when you click on the item, the program takes you right to the form and line where the information goes.  

Many of my clients are drop offs or mail ins, and this feature saves me a ton of time!

I just thought I would mention it here in case others have not discovered it yet.

Here is what the printed or e-mailed version looks like.  Pretty neat!!

   DATE: 1/29/2016

Subject: Information required to complete your tax return

Dear

Please send me the following information at your earliest convenience to ensure timely filing of your tax return

 1) Form 1040:  Individual: Federal Information Worksheet: Taxpayer occupation
 2) Form 1040:  Individual: Federal Information Worksheet: Taxpayer birthdate
 3) Form 1040:  Individual: Federal Information Worksheet: Taxpayer license number
 4) Form 1040:  Individual: Social Security Benefits Worksheet: Line C Taxpayer
 5) Form 1040:  Individual: Capital Gain Detail Entry Wks: Cost or Adjusted Basis (2) fort EXXON

Sincerely,

Also seems that the driver just couldn't cut the mustard.

Frankly, I find this to be the wurst accident imaginable!!

Why not give yourself the best of all of your operating systems by using a multiple boot program?  I cloned my Win 7 operating system and upgraded this clone to Win 10.  I also downloaded from MS a clean install of WIN 10 and installed that as a third operating system.  All of my programs and data are kept on separate hard drives which can be accessed from any of the three operating systems.  All of my hardware and 103 out of 106 of my programs all work perfectly under WIN 10.  It took a few weeks for Soundblaster to release the WIN 10 drivers, but that was a small price top pay.   If either of the WIN 10 installations acts up,  I can just boot to WIN 7 and continue on with whatever program and data I was using.  ProSeries loaded from 1999 through 2015 with no problem and ATX also loaded from 1999 through 2012 (the year I left) without any problems.  As I said, I can open any of these programs and work on them with any of the three installed operating systems.  Of the 3 systems, my favorite is the clean install of Win 10.  It is the fastest of the three in handling all of my programs from all of the tax programs, to MS Office professional, to my Scan Snap.  The new internet browser, Edge, needs some work, but I can use IE 11 and Chrome from Win 10 and use Edge when I want to use some if its new features such as being able to highlight and mark up web pages.  I have another computer running strictly XP networked with my main computer which goes back to my 1988 Pro Series tax programs and clients (it was Chipsoft then) and back to 1992 to my first business returns with ATX Saber.

I have used this approach of dual and triple booting since Windows 95 to allow myself to be able to ease into new operating systems at my own pace and always have the "old standby" available at a moment's notice.  That way I can pick and choose what I want out of the new operating system (such as speed) and not give up anything until I am ready.

The multiple boot program I have used is a free program Easy BCD.  If you have at least two hard drives on your system, this might give you an opportunity to check out WIN 10 and not have to worry about having to "downgrade" back to WIN 7, since you will also have your complete WIN 7 installation at a moment's notice.

What is probably happening is that the employer is taking a distribution from the company of money on which he (the employer) has already paid the tax.  Then he is giving it to his employee.  Hence, he is telling the employee that the tax on the money has already been paid (it was taxed as corporate or partnership profit to the shareholders or partners).

In the employer's mind, the tax has been paid and he is treating the check to his employee almost as a gift, which it could be if it were not given in return for any services rendered.

As to why employers would do this, consider that the employer is not paying his share of FICA and Medicare, nor is he paying Fed and State unemployment tax.  Depending on the employer's tax bracket (which could be zero if there is a large amount of deductions or a NOL on his return) he, the employer, could actually be saving money.

I do not agree with the employer nor would I take the client unless he reported all of the checks as income.

Quote

 

I have been using PCSoftware Client Write-up out of Florida for 15 years and it is an easy to learn yet complete write up system for generating Financial statements and also for W-2's and 1099's with its built in payroll module.  It is a small company with great customer service.

I installed Win 10 Pro as a multi-boot with Win 7 Ultimate 64 bit a few days ago and so far I have been impressed with it.  Win 10 will run Pro Series from 2001 through 2014 and will run ATX Max from 1999 through 2012 (the year I left ATX).  With very few exceptions it runs all of my other programs from Win 7 also. ( Peachtree accounting 2010, Quicken 2009, my write up program PC Accounting Software out of Florida, MS Office 2010, and all my utility programs).  It doesn't run Norton Ghost 15, but I expected that and have Norton 360 free from my internet provider.  As of today, the drivers are not ready yet for my Sound Blaster Fatality card, but they have been promised by the end of August.  Also, my Scan Snap drivers are not yet available.

I have exactly the same desktop I had in Win 7 and unless I want them the "tiles" do not make an appearance.  I have IE 11 as well as Edge, the new browser, and I like Edge a little better.

I have installed Win 10 on a different hard drive form Win 7, and all my data files are on different hard drives which can be accessed (read from and written to) by both operating systems.

I hated Win 8 on my wife's laptop and was equally unimpressed by Win 8.1, but so far I think Microsoft got it right with Win 10.

Yes, there are some bugs and a lot of people have trouble installing Win 10, but I think eventually Microsoft will have all of the bugs fixed and people will be happy again.

Thanks, Eric.  I probably will try the clone/upgrade path.  And yes, the computer is rather large and heavy.  It is a Digital Storm with 2 fixed internal hard drives, and 5 hot swappable hard drives.  It is glycol cooled and weighs about 97 pounds.

My work computer is 5 years old running Win 7 Pro, but it has an Intel i7 running at 3.2, 16 gigs of RAM, and 7x2 terabyte hard drives.  I think I will set up a dual boot with Win10 when it comes out at the end of this month.  A question for Eric:  Do you think I would be better off setting up two partitions of Win 7 Pro 64 bit with all applications in place (cloning my current drive in a new partition) and then upgrading one of them to Win 10 or doing a fresh install of Win 10 in a new partition and then add back all of my programs?

I have been practicing since 1973 and have never had E&O insurance due to cost.  I do have an additional umbrella policy on the house to cover liability in case of falling on the ice, etc.  Any errors over the years I have paid the penalty and interest portion and told the tax payers they had an interest free loan from the IRS for the time it took the IRS to find the error.

I also got the ix500 this year and love it!  Small footprint for desk, wireless, and 50 ppm both side scanning in full color.

David,

Since the K-1's are within an IRA, no reporting is required.  I get a lot of these each year.