peggysioux5

If CA LLC taxed as partnership wants to dissolve LLC, with business continuing after dissolution, is a new Federal EIN and CA payroll tax account # required? Taxpayer (owner of business) submitted dissolution paperwork to CA for LLC, but continued using existing federal EIN # and CA payroll tax account #’s. Taxpayer states he has confirmation of dissolution from CA; however, CA has notified business that business owes for several years of LLC tax (taxes for years after dissolution.) Would CA consider LLC not dissolved if business continues even if dissolution papers filed?

I completed Form 1310 listing daughter of former deceased client as the person claiming refund due to deceased taxpayer as she is the trustee of revocable trust that became irrevocable upon taxpayer's death. My question is this: Taxpayer is due a refund; when setting up direct deposit of the refund, does it matter if the bank account that is listed is daughter’s or trust bank account? Being 1310 lists daughter, wanted to confirm that there would be no problem if bank account for direct deposit is a Trust bank account. Or is direct deposit not allowed due to Form 1310?

I see the March 16th thread, but unable to locate the March 1st thread. Would you be able to provide the subject line of the March 1st thread?

Taxpayers had large capital loss carryovers from previous years. Taxpayers began handling their own tax returns in 2019 and inadvertently dropped the previous years’ carryover losses. Are amended tax returns required for 2019 through 2021 to reflect the correct carry-over losses or can I just calculate the correct carry-over loss to date and reflect on 2022 tax return? The change in tax liability for the years in question are zero to very minimal with a decrease in tax liability to the taxpayers. Taxpayer is dealing with a serious health issue and would prefer not going back and amending previous years if possible. Peggy Sioux

Taxpayer was eligible for employer health insurance in 2022 but declined coverage because Covered CA coverage was less expensive and better coverage. Employer health insurance met minimum essential coverage and was affordable; however, Covered Ca insurance agent stated taxpayer was eligible for the subsidy and set up subsidy for 2022. Taxpayer stated Covered CA agent was aware that taxpayer was offered employer health insurance. How do other tax professionals handle? Do you mark within tax software that taxpayer was not eligible for credit and therefore pay back subsidy or being insurance agent deemed taxpayer was eligible, no payback of subsidy required? 8962 instructions state: "However, employer-sponsored coverage is not considered affordable if, when you or a family member enrolled in a qualified health plan, you gave accurate information about the availability of employer coverage to the Marketplace, and the Marketplace determined that you were eligible for APTC for the individual’s coverage in the qualified health plan." Taxpayer states accurate information was provided to insurance agent. Again, how do other tax professionals handle? Peggy Sioux

Another tax professional provided the following information: being the house was in an irrevocable trust at death of grantor and the step-up happened at that time (many years ago), when the first beneficiary passed away without closing out trust, there is no secondary step-up for first beneficiary's children at date of first beneficiary's passing being the home was titled to trust and asset had not been disbursed to beneficiaries. Abby, did the lawyer confirm there was a secondary step-up at beneficiary's passing?

Residence was placed in trust with two beneficiaries. Trust became irrevocable at time of grantor passing. Prior to residence being sold while still in trust (many years passed from grantor passing), one beneficiary passed away leaving his 50% to his children. Would the deceased beneficiary's children receive a step-up in basis at their father's passing of residence so that when residence did sell, original living beneficiary would have a step-up in basis based on grantor's passing several years ago, but deceased beneficiary's children would have a step-up based on father's passing? If that is the case, would the sale of the residence by the trust list the residence as two separate assets - 50% for original beneficiary with lower basis and 50% for secondary beneficiaries with basis based on father's passing?

I have a new client who is a partner in rental partnership who has a 754 election from 2016 due to the death of her husband and step-up in basis for rental. I have not dealt with Section 754 election in the past so have been researching the handling of the election. The research that I found shows a deduction on the partner's tax return should be reflected for the depreciation of the stepped-upped asset on page 2 of Schedule E. The previous tax preparer shows an amount on K-1 on line 13 with code "W". However, there is no coinciding entry on partner's individual tax return and the amount on line 13 of the K-1 is not included in line 2 of the K1. Could other tax preparers enlighten me as to why the K-1 entry from line 13 would not flow to the individual tax return? The 754 election mechanics does seem to be complex so I definitely could be missing something. The other issue that has me puzzled is that even though the 754 election applied to wife, the previous tax preparer split the 754 election amount of depreciation between both remaining partners (again neither of those entries flowed to individual tax returns). Shouldn't the full depreciation amount be reflected on wife's K1 rather than only 50%? PeggySioux

Lifetime credit is for nonbusiness energy property. My question applies to residential energy efficient property credit which is not limited to lifetime credit of $500.

IRS §25D does not state credit is limited to one time. The Taxbook shows the credit available for either the principal residence or second home. My research leads me to believe a taxpayer is able to take the credit more than once; however, I would feel more comfortable if I found something in writing stating the credit can be taken more than once. There seems to be differing views between tax preparers.

Is the residential energy efficient property credit for solar a one-time credit? If a homeowner received the credit for installing solar panels on residence and later moves and installs solar panels on new residence (if credit is still available), would taxpayer be eligible to claim credit a second time?

Taxpayer has investments in two different accounts with two different investment companies, and one account shows accounting method of FIFO and second account shows accounting method of HIFO. Can taxpayer use two different accounting methods in the same year to determine gain or loss as long as taxpayer can substantiate? PeggySioux

Taxpayer was domiciled in CA when entered the military service. Taxpayer now lives in North Carolina due to permanent change of station orders. Taxpayer owns a home in North Carolina. She has an Alaska driver license due to previous order. Taxpayer still has CA state income tax withheld. CA states “California military servicemembers who leave California under PCS orders become nonresidents of California for income tax purposes and military income is not taxable to CA.” North Carolina states “Under the Servicemembers Civil Relief Act, if you are a legal resident of another state who is stationed in North Carolina on military orders, you will not be taxed on your military pay by North Carolina. To which state, if any, is the military income taxed? Taxpayer does not keep up home in CA while in military (joined right out of high school). Taxpayer stated at some point, she might return to CA. Taxpayer stated she purchased home in North Carolina being cost of rent is about the same as purchasing home. How would other tax preparers handle? Peggy Sioux

I use Drake and have the same issue. Peggy Sioux

Taxpayer received advanced payments of premium tax credit for 2021 (and has for several years). Taxpayer stated she provided all information to the Marketplace stating that she told Marketplace representative that she was eligible for health insurance through employer that met MIC when she first enrolled in Covered CA. She is not asked, nor does she provide, the cost of the employer-provided insurance to the Marketplace each year. The instructions state: If taxpayer provided accurate information about his employer’s coverage to Marketplace, and the Marketplace determined that the offer of coverage was not affordable, taxpayer is eligible for APTC. The Marketplace determined she was eligible for APTC several years ago and just renews every year without determining affordability based on cost of employer-provided coverage. So my question is this: Is she eligible for the Premium Tax Credit? Do I mark that she is ineligible for PTC being employer-provided coverage is below 9.83% of income or being the Marketplace “determined” her eligible, she is not liable for payback of the APTC? Input is very much appreciated. Peggy Sioux

CA states: If you are classified as an independent contractor at the federal level but classified as an employee for California, you may have received different types of income reporting forms for federal and California purposes. If an individual falls into that category, does the "employer/payee" complete the W2 showing wages for CA only being a 1099 is being filed federally? Do wages only show in the state portion of the W-2?

I should have been more specific in my post as my question only pertains to the handling of expenses paid with PPP proceeds for the CA individual income tax return. I am talking about their first PPP loan and the handling of the expenses paid with PPP proceeds for CA being taxpayer did not have a reduction of 2020 gross income by 25% compared to 2019. For the CA tax return, if taxpayer is a sole proprietor with employees, would the portion of payroll that was paid with PPP loan proceeds for sole proprietor be excluded from the reduction of expenses and only the portion of PPP loan proceeds that were used to pay employees' payroll be included on CA tax return as a reduction of expenses? Or being the sole proprietor has employees, all expenses paid with PPP loan proceeds are required to be included on CA tax return as a reduction of expenses? Peggy Sioux

If Schedule C taxpayer with employees received a PPP loan but did not have a decrease in gross income of 25% in 2020 compared to 2019, would $20,833 of the loan amount be exempt from reduction of expenses being that portion of the loan would be considered his net income from Schedule C and the balance of the loan which was used for employees’ payroll be required as a reduction of expenses. Example – Schedule C employer with over $100,000 Schedule C net income obtained a PPP loan of $50,000. Would $29,167 of payroll expenses be required as a reduction of expenses or would the full $50,000 be required as a reduction of expenses? Peggy Sioux

I feel rather ignorant asking this question, but here goes…..I have not set up the process to receive electronic signatures from my clients as of yet; however, I have a client asking me if I will accept an electronic signature through Docusign. Do I need to initiate the software that processes the electronic signatures so that verification standards are met for tax purposes or does Docusign process all signatures through a verification process no matter who initiates? Peggy Sioux

The deceased spouse died over five years ago and estate closed several years ago. So, does another estate return need to be filed? Peggy Sioux

Taxpayer does not want to request correction of deceased husband's W-2 even though W-2 was issued incorrectly with federal and state withholdings rather than correctly reporting on 1099 under taxpayer's social security #. She said she did not want to go through the hassle and didn't care about getting corrected......so, should I include the the W2 income on taxpayer's tax return as "other income"??? Peggy Sioux

Taxpayer’s mother had a revocable trust and passed away in 2019. No estate/trust income in 2019. Personal residence with mortgage was in trust. Attorney obtained an EIN for trust in January of 2020 and attorney had taxpayer obtain a loan under trust’s EIN in January of 2020. Loan was only in existence for two months (high interest loan) and then taxpayer (trustee and beneficiary of trust) refi’d in taxpayer’s name to buy brother out. Taxpayer made the payments from her personal funds on the high-interest loan for those two months (interest and points over $11,000). Would the taxpayer be considered an equitable owner being she was a beneficiary and mother had passed; and therefore, able to claim the interest on her individual tax return? I found the following in the 1041 instructions: Qualified residence interest. Interest paid or incurred by an estate or trust on indebtedness secured by a qualified residence of a beneficiary of an estate or trust is treated as qualified residence interest if the residence would be a qualified residence (that is, the principal residence or the secondary residence selected by the beneficiary) if owned by the beneficiary. The beneficiary must have a present interest in the estate or trust or an interest in the residuary of the estate or trust. See Pub. 936, Home Mortgage Interest Deduction, for an explanation of the general rules for deducting home mortgage interest. Peggy Sioux

Thank you so much for providing the above link. Very informative and helpful. Peggy Sioux

How are other tax preparers handling taxpayers who state they did not receive their economic impact payments in 2020 and early part of 2021? Are you inputting zero economic impact payments received; therefore creating a credit on tax return? Or are you asking taxpayers to set up account with IRS to confirm they did not receive their payments before inputting info on tax return? I have a client that adamantly states he did not receive the first stimulus payment, but received the second stimulus payment in full. Payments would have not been directly deposited because taxpayer has never provided banking info to taxing agencies. I would think that if taxpayer received second payment in full, he would have also received first payment, but he is telling us that he did not receive. He also is not too big on using computers so he does not want to set up an account. Just checking to see how others are handling. It amazes me how many people don’t remember receiving or how much they received……that means their economic situation was not dire…..when you are in a situation where every penny counts; you know how many pennies you received! Peggy Sioux

Previous tax return shows no amortization or ABP adjustment and taxpayer isn't aware of amortization in prior years. Excuse my ignorance, but why would a taxpayer not want to reduce the annual interest each year by amortizing? If there is no amortization each year, is there an adjustment at maturity being taxpayer did not amortize?