DANRVAN

Have not dealt with this for awhile.  Parent's return rejected because son already filed and claimed himself even though it did not benefit him.

Parent was hoping to get refund right away.

I see the following options:

-Amend for son, wait for x number of months for it to process and then e-file for parent.

-Paper file for parent with explanation and attach copy of 1040x of son.

-E-file without son, receive reduced refund (still have 2 other dependents), then amend for both parent and son.  Realize that does not involve a complete and accurate return.

I have used the first method in the past but there was no hurry for a refund.  

Has anybody here used the paper filing method, and if so how long did the process take?

Any other suggestions are appreciated.

Thank you.

On 3/4/2020 at 6:40 PM, BulldogTom said:

the old method retroactive to 2018?

That is true.  I have not had to deal with it yet.

22 hours ago, TKTax said:

They sold house just after.

Who  received the proceeds and whose name was on the sale contract?

3 hours ago, Edsel said:

no one but myself knows all the circumstances of the client -

That is true, but the limited information provided does not indicate a legitimate position taken in the past or present.

Yes, we do have a responsibility to keep our clients in compliance with the tax code and and allow them the maximum tax benefits available.

So if this client had actually paid himself a one time payment during the year of $128,000 in December he would have a case.

However, if instead he had taken monthly distributions of $10,000, then he needs to report payroll accordingly, regardless of the QBID benefit.

You have not explained how you can "conceivably can create a payroll for 2019 paying himself $128,000 in December."

3 hours ago, mircpa said:

least now he will learn lesson

As is see it, the lesson this client will learn is that he can call it whatever he wants in order to get the best tax position from the transaction.  So now 63 days after the year end, it is no longer a social security saving distribution; but a QBID producing reasonable salary, paid on the last day of the year!

You are right, a reclassification is in order, but sounds like this client will only go with whatever gives him the net benefit.

45 minutes ago, Lynn EA USTCP in Louisiana said:

The payroll W2's must have been timely filed to SSA (i.e. 1/31/2020) for it to qualify for QBI.

 

There is a grace period per  199A(b)(4)(C).

12 hours ago, Edsel said:

stands to lose QBI because he has zero payroll

and you will prepare inaccurate returns to bail him out?

12 hours ago, Edsel said:

I can't find it in my research materials

did you review 199A(b)(4)(A) and 199A(b)(4)(C)?

9 hours ago, Catherine said:

The Sch C "partner" 1099-MISC does a circle:  out as expense and back in as income; no net change.  The other "partner" gets her 1099-MISC and reports on her own return.

I am not following you Catherine.  Were both of these individuals involved in the business?

AMERICAN AIRLINES INC. v. U.S.looked at lack of restrictions on transfer and use of cards in determining that they were cash equivalents.

not taxable to the estate, 

Reg § 1.101-1.

16 hours ago, WITAXLADY said:

thx - just do not understand why life ins is taxable?

In some situations life insurance proceeds are considered part of a decedent's estate and taxed for inheritance tax, but not for income taxes.

The rule is the same for estates and trusts.  The beni's are not allowed the deduction until the final year of the trust or estate.  Then it goes into the big bucket of "Excess deductions on termination of an estate or trust", which could have been deductible in the past only as a 2% misc itemized deduction...so under current tax code no deduction what so ever.

See Reg § 1.642(h)-2. for details.

47 minutes ago, Abby Normal said:

Except... guaranteed payments reduce ordinary income because they are deducted by the partnership as an expense, so the capital account will decrease for all partners' shares of the guaranteed payment deduction.

To clarify, guaranteed payment does not directly reduce the capital account of the partner receiving a payment, as would a distribution.

8 hours ago, cl2019 said:

 when "guaranteed payments are treated as a partner's distributive share of ordinary income".

That is on the partner's side of the transaction, It does not mean that the partnership treats it as a distribution to the partner.  See code sec 705(a).

10 hours ago, JackieB said:

I have a client with DPAD passed through to them on 1099-PATR

Jackie,  can you post the amounts in boxes 3, 6 and 7?  

4 hours ago, JackieB said:

I'm just going to have to call ATX, I think it is more of a software not doing what it is supposed to be doing problem.

This is an issue that I would not trust the software on.  You have three moving parts here:

-DPAD from the COOP per 199A(g),

-the "patron reduction" per 199A(b)(7),

-and QBID which is reduced by the "patron reduction".

This all came about from a proposed reg in June 2019.   There is an IRS  Q and A ,https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-provision-11011-section-199a-qualified-business-income-deduction-faqs 

I have a few clients that this will apply to and personally will need some more research before I file for those in the coming weeks.  

Sect 199A(g) allows the modified DPAD for Coops and patrons since the coop is a corporation that does not qualify for 199A

19 minutes ago, Dan said:

I am thinking that maybe Box 7 "Qualified payments should go on Schedule F, line 2."  

It looks to me like box 7 is used to calculate a reduction of QBID for the patron on FORM 8895-A.

See my post above.

8 hours ago, Dan said:

 

Question:  Do you need to do anything with boxes 6, 3, and 7 if taxable income is less than $315,000?

Box 3 is the gross sales to the COOP,  it needs to be reported as a patr dividend on schedule f, otherwise client gets a CP-2000.  Since box 3 is gross sales,  you need to account for storage, handling etc to reconcile to the net cash received.

Line 3 is an allowable DPAD under 199-A(g) for the coop patron.  A QBID might also be allowed, but the QBID must be reduced by a "patron reduction" per 199A(b)(7).

As  I understand it , the patron reduction is the lessor of :

A. 9% of QBI allocated to qualified payments or

B.  50% of W-2 wages with respect to the QBI allocated to qualified payments.  

It appears to me that the qualified payments referred to the amount from Box 7. 

This comes from the proposed reg of June 18, 2019.

I haven't been down that road yet,  but it appears the QBI reduction for the patron is computed on Schedule D of form 8995-A.

7 hours ago, Gail in Virginia said:

I believe that box 3 and box 7 in this case offset each other and don't need to be reported.

Haven't dealt with this yet for 2019, but believe box 3 needs to be reported as in the past, basically sales to the coop.

https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-provision-11011-section-199a-qualified-business-income-deduction-faqs

There is still a version of DPAD for certain farm coop's, which is passed through to farmer patrons.  See 199A(g).

I think you have to force the deduction from 8903 to line 8 of schedule 1 for 2019.

Thank you grandmabee and cbslee.  I have a limited number of payroll clients, so should not be a problem.

Oregon form WR is not listed at all, available or unavailable!  (due Jan 31)

Anyone here have contact with ATX in regards to this?

Or have an ATX e-mail to inquire about forms? 

7 hours ago, DANRVAN said:

EDoTT, excess

Meant to say excess deductions on trust termination.

On 1/25/2020 at 6:50 PM, BulldogTom said:

In the final year of an estate, property taxes that are flowed to the beneficiary are subject to SALT limitations under the new tax law.   Am I correct?

Assume you are referring to EDoTT, excess distributions on trust termination.  There are several barriers.

At the 1041 level, the property taxes would be limited by SALT whether or not passed to beni's.

On the beneficiary side, the deduction was formerly allowed as misc itemized deduction which has been suspended by TCJA.

There was an IRS notice in 2018 seeking comments on the effect of TCJA on EDoTT deduction by beni's and possible future regulation (which I have not seen notice of).

So as I understand it, there is no deduction on the individual beneficiary's return at this point.