DANRVAN

50 minutes ago, BulldogTom said:

employer does not pay the employee more than $2400

If  less than $2,400 , then not subject to SS on Schedule H.

If paid $1,000 or more in any quarter, then subject to FUTA on Schedule H.

W-2 should be filed regardless.  

If less than $2,400 and ss withheld, should consider refunding employee for fica since it was not required.

2 hours ago, cbslee said:

Good job on knocking down the strawmen you have created.

I don't think that is fair statement, but you are entitled to your opinion.

I

3 minutes ago, jklcpa said:

Enter as wages so it's subject to regular tax but not s.e.tax.

That is what I have been saying all along.

3 hours ago, cbslee said:

Note: If the taxpayer paid more than $1,000 in any calendar quarter, then they are required to file Schedule H and pay FUTA

Are you saying employee should file H and pay the FUTA, tax, which is the employer's responsibility?

1 hour ago, cbslee said:

The exclusion you keep referring to applies to the the withholding of taxes by the Household Employer.

I don't believe it absolves the employee from paying employment taxes.

The exclusion does not have anything to do with FUTA, and I don't think I ever said it did.  What I am saying is the employee does not have to make up for it; whether it was due on form 940 or Schedule H.

The code says that wages paid to a household employee below the threshold are not subject to FICA/mc.  Why should a taxpayer working as an employee with wages below the threshold pay into them by filing a schedule C?

2 hours ago, cbslee said:

Note: If the taxpayer paid more than $1,000 in any calendar quarter, then they are required to file Schedule H and pay FUTA

Right, but that applies to employer; so would not directly  effect the client of OP who is an employee.

52 minutes ago, cbslee said:

The OP implies that working as a nanny began in late 2022 and continued into 2023.

In which case I would put the $2,000 on Schedule C. 

I was not aware that $2,000 could be excluded from SE Tax?

There is a threshold for paying and withholding FICA/mc for household employees.

If she is under that threshold then why subject her to SE tax unless she choses to?

5 hours ago, Dave T said:

Since no taxes were withheld ( paid in cash) does she need to record the income on Sch C and pay S/E tax? 

Since she is under the threshold for household employees fica, I would not put it on C.

12 hours ago, Abby Normal said:

sure it was not reported on a 1099 and didn't end up on the 1040?

There seems to be endless possibilities here. I think estate would have burden of proof that it was already taxed by decedent. Otherwise I agree with Sara, estate steps into the shoes of decedent and it becomes IRD.

On 2/4/2023 at 11:16 AM, kathyc2 said:

However, anything over the 14 cents is pay and taxable income

I question that.

 For example let’s say charitable organization distributes meals to shut ins.  Meals are delivered by employees of the org. and volunteers.  Employee’s and volunteers all use their personal vehicles; and are all reimbursed under an accountable plan using the standard federal mileage rate.

The standard rate is bases on the estimated cost per mile of operating your vehicle.

For whatever reason, IRS does not allow you to deduct  the full cost for medical or charitable travel.  However, the cost is still the same whether you are driving for business, medical or charity.

So if a volunteer/client came in and said they received $xxx.xx from charity as reimbursement for travel under accountable plan, I would offer the position that it is not taxable income over the standard rate for the charitable deduction.  

Instead, they have been reimbursed for the cost of operating their vehicle for the benefit of the organization.  That also appears to be the position taken by Oregon DAS as mentioned above.

1 hour ago, Sara EA said:

Income is taxed in the year received, so the divs will be taxed to the estate.

Good point.  So unclaimed income was received by "the state" X years ago and then paid to estate year after death. 

I think I will crawl back into my rabbit hole for the night.

I have not seen an authoritative cite one way or the other.

However, the Oregon Department of Administrative Services claims there is no tax consequence if volunteers are reimbursed at the GSA rate under an accountable plan:

https://www.oregon.gov/das/Financial/Acctng/Documents/40 Travel search.pdf

 128.   "Volunteers are eligible to receive a mileage reimbursement of up to the GSA rate, as identified in Appendix A. As long as the reimbursement is handled through an accountable plan, there are no tax consequences related to the reimbursement. Refer to paragraph 111 for information on an accountable plan."

22 hours ago, TAXMAN said:

The remainder $ appears to be dividends turned over to state some years back. Admin seems to think maybe 10 to 15 years ago.

That makes sense, as mentioned above $2,000 income vs $10,000 in property does not sound right for year after death.

So maybe no income to the estate.

1 hour ago, Gail in Virginia said:

Or was it sold 10 years ago when the state received the property and they are just issuing the 1099B because they finally found out who the property belonged to so that they know who to issue the 1099B in the name of?

Good question.

3 hours ago, cbslee said:

I was definitely headed down the wrong rabbit hole

        and I was clawing my way out!                                                  

6 minutes ago, cbslee said:

Any Taxable Income that ended up in Unclaimed Funds

But OP specifically referred to 1099 B,  

That tells us that property of decedent was sold and estate would have basis equal to fmv at date of death.

I can not think of any circumstance where estate not have basis in property sold.

6 minutes ago, cbslee said:

On the other hand the $10,000 could be taxable proceeds which don't qualify for a step up in basis.

We don't really know do we?

But off hand I can't think of any unclaimed property that would not receive a step up basis and sold for $10,000.

Can you?

What else would the proceeds be from?

14 minutes ago, BulldogTom said:

 I don't think I could take that position and potentially have to defend

I would rely on the Cohan rule for a reasonable estimate of basis with in one year of DOD; if not otherwise determined.

This is obviously not high dollar property (like real estate) that would have appreciated in value.

On the flip side, I don't think auditor would have much of a case to deny it.

Maybe I am missing something, but It doesn't seem right to have $2,000 of income from $10,000 of assets.

15 hours ago, kathyc2 said:

If you look at the last year or two of 1040 of deceased, you be able to tell what the fund was.  

Or if not available, look into transcripts.

On 2/2/2023 at 8:09 AM, TAXMAN said:

. I think the dividends should be taxable to the estate but not the proceeds

The way I see it, you are looking at maximum taxable income of about $2,000 which should be taxed at the beneficiary level.

You mentioned 10,000 of property sold.  As Bulldog mentioned it is safe to say that will be offset by stepped up basis.  Report it on Schedule D of the 1041 and call it an unknow asset of decedent.

As I understand your post, that leaves $2,000 of potential income to report on the 1041.  That will go on K-1 if reported on final 1041 or distributed within 65 days of estate year end. The result should be in $200 - $400 of federal income tax to beni’s,+ whatever your state might tax.

If these are the only items reported on 1041, they will offset by any legal and accounting fees….etc; in full proportion.

So before you spend to much time digging into this, you should consider the cost vs benefit to the estate and discuss that with them.

18 hours ago, Slippery Pencil said:

This was discussed on the TaxTalk io group a couple years ago. 

Out of curiosity, I did a search on that site and found thread titled  "2020 SOLAR CREDIT"

In post #7 reference was made to Section 25D(e)(8) with opinion that credit was allowed when hook up in following year.

In post #8, #7 was question, but changed his mind and agreed in post #10.

In post #12 reference was given to PLR 201809003 in support of disallowing the credit in 1st year.

In post #13 it was pointed out that fact pattern and issue addressed in PLR 201809003 was not same as OP in the thread.

In post #14 a reference was made from "Office of ENERGY EFFICIENCY & RENEWABLE ENERGY" website Q and A in support of disallowing the credit until hooked up.  

So my question is, what authority does the Office of Energy Efficiency have when it comes to interpreting the tax code?

25 minutes ago, cbslee said:

How many clients will consider the definition of "installed" and actually apply it to their situation?

I think key here is to point out to them the difference in terminology between section 48 and 25D; placed in service vs installation completed.

I would also point out that neither the IRS or case law has defined the term "installation" beyond common definition in this instance.

In other words, I am comfortable with it if they are; and a reasonable position has been taken.  Therefore I will not deny them the credit.

9 minutes ago, DANRVAN said:

Getting back to OP, I would have this discussion (and document it) with client and let them decide if they met the definition of “installation”.

 

And I would add to that "absent any case law".

9 hours ago, Slippery Pencil said:

This was discussed on the TaxTalk io group a couple years ago.  Pretty much everyone agreed the credit was taken after the system was hooked up and functional.

But that does not tell us anything.  What authoritative cites did they refer to?

Section 25D(e)(8) (A) states : In general  Except as provided in subparagraph (B), an expenditure with respect to an item shall be treated as made when the original installation of the item is completed.”

That is in contrast to section 48 for a commercial energy credit which specifically states the property must be placed in service.

While there might be some uncertainty as to the definition of “installation”, obviously there is a lower standard for claiming a residential credit vs a commercial credit where the term “placed in service” is used.  Without researching the legislative history, it appears congress intended to give individuals a greater incentive to go solar by setting a lower standard.

In fact, section 25D drops the bar a notch further for the residential credit in stating an “expenditure” is made when installation is completed; meaning the credit is allowed if the installation is completed in year one while payment is made in year two.

In regards to the term “installation”, let’s say you put a new engine in a semi-truck and the work was completed by December 31,2022.  However, the truck was not licensed and permitted until January of the next year.  Depreciation on the engine cannot begin until placed in service in 2023.

Now what if tax code said depreciation could begin when “installation is completed”, would you tell client no depreciation until ready and available for service?  Or would you start depreciation in year engine was physically installed instead of waiting until the next year when permits were obtained?

Getting back to OP, I would have this discussion (and document it) with client and let them decide if they met the definition of “installation”.

On 1/29/2023 at 2:21 PM, jasdlm said:

but the only other option I can think of is to have my client refund the FICA/Medicare,

Since the employee was under the threshold for FICA/mc, that sounds like the right thing to do,.

Then for that employee's W-2, report zero for fica/mc wages, but report the gross in box 1.

ATX should then allow you to file with household employee box checked.