DANRVAN

meant to say EITC. How come we are no longer able to edit?

Correct. Section 211(a) of Division EE. on page 1,885. The provision allows you to substitute your 2019 earned income (if higher) in place of your 2020 earned income, although it does not specifically mention EICT or CTC...

That sounds right Max, thanks.

The first year I broke my ankle with an ER visit. My out of pocket for the year was around $500. Health share plans are not for every one, but for those who pledge to live a healthy lifestyle. The plan promotes wellness and prevention. So if you are a chain-smoking, pro motocross racer that eats three times a day at McDonalds; you need not apply!

She is referring to "health share plans"; Medishare is one of many. I joined one called "Solidarity" a couple years ago. My wife and I were paying over $24,000 a year in premiums for two healthy individuals in their 50's. Now we pay less than $5,000 per year.

Proposed Reg 1-213-1 gives health share membership payments the same status as health insurance premiums. Therefore, health share qualifies for both Schedule A and the SEHI deduction. The proposed reg was in response to Executive Order 13877 back in 2019 which was directed to give health shares equal footing with health care premiums.

Is there a potential to minimize penalties for taxes owed? For example, if an extension was filed, then I believe late filing penalties would jump from 15% to 20% after January 15th. If an extension was not filed and tax owed, then probably already maxed out at 25%.

It is not double dipping, do the math! 40,000 book income less 30,000 tax income = 10,000 reduction.

It does not work that way. When you exclude the 10,000 it reduces taxable income by 10,000. If you also disallow expenses by 10,000, taxable income is increased by 10,000. So it becomes a wash, taxable income = book income. That was the law prior to CAA 21.

Something to watch for in an S-Corp is increase in OAA, which might limit amount of distribution treated as tax-free return of basis in stock.

Actually it is not double dipping. Consider this example: Client had Sales of 90,000 and expenses of 60,000. Received PPP OF 10,000 with forgiveness applied to 10,000 of expenses. His book income would be 100,000 less 60,000 = 40,000. Prior to CAA 21, his taxable income would exclude the 10,000 of PPP and reduce deductible expenses by 10,000. Therefore net taxable income would be 90,000 less 50,000 = 40,000. The net effect of the CARES was to include PPP in taxable income by reducing expenses. In that situation taxable income = book income. Now under CAA 21, taxable income is 90,000 less full deductions of 60,000 = 30,000. This results in taxable income that is 10,000 less than book income. There is no double dipping; 10,000 received and excluded. Hope this helps, this is how I explained it to a client.

Darlene, from your post it appears you might not be aware that there is a provision in the Consolidated Appropriations Act of 2021 that allows an employer to take both the PPP (with forgiveness) and the ERC in the same year. However, you can not use the same payroll expense for both in order to prevent double dipping. You can amend prior 941 for unclaimed credits.

Are you saying the company pays 5,000 and e'e an additional 1,500 for total of 6,500? Or are you saying total premium is 5,0000: split 3,500 company and 1,500 e'e? If neither taxpayer or spouse is eligible for an employer health plan, then the net amount paid or reimbursed by the Sub-S qualifies for the SEHI deduction. So if company paid a net of $3,500, that is the taxpayer's deduction.

It depends on the purpose of the payment. There is a lot of case law in regards to gifts to employees vs compensation. Since the pastor is a former employee, there should be a clear line as to whether the payment was compensation for services; or an act of charity. As Pacun mentioned, the intend of the church is the key. The payment could be classified as compensation If it was an enticement for future services or if he had not been fully compensated in the past. The reason for his termination could shed some light on the case. So for example, if he had fallen upon hard times, the church could make a gift out of concern for his welfare. In defining gifts, courts have used terms like affection, pity, generosity....

I have rolled over a few returns and fixed assets were there.

Mine rolled over. I think you need to first roll over a client file with with the preparer info on it.

Are you saying the entire loan was paid or a portion? Reduce his share only by the amount that was paid by other partners.

Apply basic partnership tax rules: -Partners share of losses are limited to basis at the end of tax year, you do not go back and amend. -Reduction of partner's share of liabilities is treated the same as a cash distribution. (sec 752(b)). -Distributions in excess of basis are income to partner.

Peace on Earth and Goodwill to All Ye on this Board!

Even if not paid until next year, I believe the all events test of sec 461(h) are met. Also, since this accrual is not subject to the recurring item exception of reg 1.461-5, the 8 and 1/2 month rule does not apply.

That is a question for the estate attorney, do they have one? Sounds like this might be a good engagement to stay away from.

If this is the first return filed for the estate, then you have the option to choose the accrual method. The accrual method option and ability to chose a short first year are two important planning tools for an estate to match deductions with income. Are they past the window for the 65 day deemed distribution rule?

Good catch!

Withholding ss and medicare for ordained clergy is not correct in any situation, regardless of whether form 4361 has been filed. Ordained clergy are "duel status"; they are considered employees for income tax purposes but are self-employed for social security. Their earnings are reported on 941 line 2 as wages, but are not reported as as social security or medicare wages. They instead report there wages on form SE of their tax return unless they have filed form 4361. (There are situations where clergy are considered contractors instead of employees, but that does not appear to be the case here) If this has been an ongoing situation, then the remedy depends on how the priest has been reporting on his tax return. -if he has not been reporting his wages on form SE and the church as been withholding ss and mc, then leave it be 2020 and do it correctly in the future. -if he has been reporting on SE or has filed 4361 then the church needs to amend all incorrect 941's previously filed; and reimburse him for ss and mc withheld.

Awhile back I worked with a cheapskate PR who drug her feet in hiring an appraiser for $150,000 of equipment in her dad's $2 million estate, ended up costing only $850.