peggysioux5

Taxpayer has interest on Treasury obligations reported in box 3 of 1099-INT. No entry in box 12, bond premium on treasury obligations. However, in details of the 1099 Consolidated, financial institution shows “noncovered bond premium on treasury obligations” with a note that “these amounts are not reported to IRS but may affect your tax return.” I know that covered bond premiums listed in box 12 will reduce the interest noted in box 3. How does noncovered bond premiums of treasury obligations come into play? Peggy Sioux

Would hotel and meals also be included in travel expenses while he was working at temporary location?

If self-employed taxpayer has no employees and has workman's comp insurance covering himself, would the expense be deductible business expense on Schedule C? Or would it not be deductible being the workman's comp benefit would not be taxable? Taxpayer is a sub-contractor and is required to carry workman's comp insurance by general contractor. Peggy Sioux

Student going to school for one semester in 2020 who is 19 years of age. He was NOT a full-time student, but a part-time student at 11 credits (college taxpayer attended shows full-time status at 12 units), and he made just over the threshold of gross income of $4,300 so he does not qualify as a qualifying child (not a full-time student) nor a qualifying relative (didn't pass the gross income test), so is he eligible for the refundable portion of the AOC and Stimulus monies?

I reviewed Pub 537 and do not see any instruction regarding updating Part 1 of form 6252. Pub 537 is where I found the worksheet for the recalculation of gross profit percentage. Pub 537 instructions show a recalculation is required but does not go into detail about updating the 6252. The instructions for form 6252 also provide no info regarding updating form due to recalculation. Peggy Sioux

Another question regarding the reporting of new gross profit percentage due to reduction in sales price for an installment sale.....Do you adjust Part 1 of the 6252 when you have a new gross profit percentage due to reduction in sales price or leave all information as originally input and just change the gross profit percentage based on new calculations? Peggy Sioux

Taxpayer’s husband passed away several years ago. 2020, W-2 was issued under deceased spouse’s social security # with federal withholding due to class action suit. Does taxpayer need to request for correction from W-2 in husband’s name to 1099 in taxpayer’s name and social? Peggy Sioux

Question regarding a complex trust – two beneficiaries of complex trust. In 2020, trustee distributed $1,000 to one of the beneficiaries and nothing to the second. Trust earned income in 2020 of $6,000 and normally accumulates the yearly income rather than disbursing. Trust document states funds can be disbursed to beneficiaries at the discretion of trustee. In my research, I read that the distribution to the beneficiary is treated as coming first from the income being corpus can’t be distributed without first distributing income. If the trust is set up at 50% per beneficiary, is it possible to only distribute to one of the beneficiaries? Peggy Sioux

You are correct; I was mistakenly using the "principal previously reported" and not the "installment sale income". Thank you so much!!! Makes so much more sense now!! Peggy Sioux

I am working through the calculations of the reduced sales price to determine new gross profit percentage for installment sale, but am uncertain on how to handle some aspects of worksheet that are found in pub 537. Example: Original sale price: $350,000 Adj. basis: $275,000 Reduced sale price: $340,000 Installment sale income rpt prvsly ($130,000) _______ Calculations $340,000 less Adj basis $275,000 Net: $ 65,000 Less prvs income $130,000 Net: ( $65,000) Future Instll Pymt: $210,000 Worksheet directs me to divide the (65,000) by $195,000 to determine new gross profit percentage. So do I have a new gross profit percentage of zero? Peggy Sioux

Original loan was in 2015 and balance of loan at refi was $220,700. Refi'd in 2020 and took out an additional $100,000 for down payment on second home. Second home purchase price was $300,000 so well below the $750,000. The point that I get stuck on is the IRS stating loan has to be secured by the qualified home in order to be deductible. If second home interest is deemed deductible based on info above, why would the IRS provide the example that I listed above showing second home interest not deductible being loan was not secured by the second home. Also, code shows home equity debit is currently not deductible. I appreciate everyone's input and I would like to include all interest, but just want to be clear in my mind the correct handling. Peggy Sioux

Another tax preparer forwarded to me this example from IRS this morning: Example 2: In January 2018, a taxpayer takes out a $500,000 mortgage to purchase a main home. The loan is secured by the main home. In February 2018, the taxpayer takes out a $250,000 loan to purchase a vacation home. The loan is secured by the vacation home. Because the total amount of both mortgages does not exceed $750,000, all of the interest paid on both mortgages is deductible. However, if the taxpayer took out a $250,000 home equity loan on the main home to purchase the vacation home, then the interest on the home equity loan would not be deductible. Based on the example, I would think the refi interest that pertains to the second home would not be deductible. I read the tax codes that you provided, but am still leaning toward non deductible, but with such varying opinions of other tax preparers, I wanted to make sure I was not missing anything. Peggy Sioux

Taxpayer refi'd primary home and used proceeds for down payment of second home. Is all interest that applies to aquisition debt of both homes deductible on refi? I recall a webinar a few years back that stated the home had to be used for collateral on loan in order for the interest to be deductible. If that is the case, the second home was not used as collateral so therefore not deductible, correct? I have had other tax preparers tell me that the interest on refi that pertains to second home would be deductible. Peggy Sioux

From Pub 721: If your annuity starting date is before 1987, you can continue to take your monthly exclusion figured under the General Rule or Simplified Method for as long as you receive your annuity. If you chose a joint and survivor annuity, your survivor can continue to take that same exclusion. The total exclusion may be more than your cost. Peggy Sioux

Yes, you have answered my question. Thank you!! Peggy Sioux

Is unemployment income considered funds belonging to person supported or funds provided by others (state)? Peggy Sioux

Thank you so much for info. Peggy Sioux

Taxpayer lives in CA, a community property state. Taxpayer has not filed 2018 tax return yet. In 2018 taxpayer was married and lived with spouse all year. Per taxpayer, taxpayer and spouse planned to file jointly when they did file. However, spouse decided to file on her own last month. She did not ask taxpayer for his tax info and he was under impression that they would be filing together. I understand there are exceptions that allow for spouses to only claim their income in instances where spouses don’t have knowledge of other spouse’s info. However, this situation is convoluted (much like any couple going through a divorce), and taxpayer does have spouse’s info. Taxpayer would prefer to file claiming 1/2 his income and 1/2 her income. So my question is this…..taxpayer has spouse’s W2 and tax info for 2018. When he files his tax return, should he file under the community property regs and claim ½ his income and ½ her income if she did not? How would other tax preparers handle? PeggySioux

S-Corp has a SBA loan in 2020 for which SBA made six payments of principal and interest due to COVID. The second stimulus enacted December 27, 2020 amended the CARES Act to provide that the SBA's payments of principal and interest made on behalf of the borrower were not taxable income to borrower. Bank that handles loan submitted a 1099-Misc reflecting the loan payments as "other income" in Box 3. Being the payments are non-taxable, should a 1099-Misc be issued? Peggy Sioux

Taxpayer has several IRA accounts and turned 70 1/2 in 2019. Financial institutions provided the information of RMD amounts needed for for each IRA account. Taxpayer cashed in an annuity that was over the required minimum distribution of all IRA accounts and received a 1099-R for the distribution from the annuity. The 1099-R for the annuity distribution is not marked as an IRA. My question - does the distribution from the annuity satisfy the RMD requirement for the IRA's? Or being the annuity was not part of an IRA, the RMD's are still required from the IRA accounts? Peggy Sioux

Taxpayer received a Partner K-1 showing an "Other Decrease of $5,000" in L - Partner's Capital Acct Analysis with an explanation of decrease of "Miscellaneous Deduction on Books and Not on Return". I use Drake Software and the only way I can reflect the $5,000 decrease in basis is if I input the $5000 in box 18, code C "nondeductible expenses". However tax preparer did not input anything in box 18. Being the K-1 does not show anything in box 18, I am unsure if there would be an issue if I input the $5000 in box 18 to get the correct basis. How would other tax preparers handle? Peggy Sioux

Thank you all for your valuable input and information; it is very much appreciated. Would other tax preparers see this error as a "change in accounting" and eligible for 3115? In my research, I read that posting and mathematical errors are not eligible for 3115. Unsure if this issue would be a considered posting error or a change in accounting. Peggy Sioux

I found an article from Spidell's CA Tax letter from January 2018 stating FTB issued Notice 2017-3 which states CA generally follows federal law in the area of unclaimed depreciation as long as: 1. CA follows the underlying federal law (e.g., MACRS for personal income taxpayers and S-Corps); and 2. The taxpayer made the same election for CA purposes as it did for federal purposes. Letter also states CA does not have an independent automatic consent procedure in place, so if a taxpayer wants to make a change in accounting method different that the method used on the federal return, the taxpayer must request a change from the FTB. So after reading the info in the Spidell's CA Tax Letter, I still don't have a good understanding. The taxpayer did make the same election for CA purposes on original tax return, but tax preparer basically adjusted basis processing the 2015 tax return. I was hoping other tax preparers had dealt and researched this issue in the past and would be able to provide some input. I was firstly trying to determine if the error would be considered a posting or mathematical error or a change in accounting then secondly determine if a change can be made via 3115 for CA only or request a change from the FTB. The unfortunately thing is 2015 and 2016 were the largest deductions and amended returns can no longer be filed so I was hoping there would be another way to correct. Peggy Sioux

Taxpayer had asset set up in 2014 correctly with bonus depreciation of 50% and depreciation has been correct on the federal side for 2014 through 2018. However, for CA return even though asset set up originally correct in 2014 for full amount of asset with no bonus depreciation, in 2015, tax preparer somehow began calculating depreciation on the basis for federal (which was 50% less) so there is missed depreciation for CA from 2015 through 2018 of over $65,000. Would this be considered a posting or mathematical error and thus not eligible for 3115 filing for CA only? Peggy Sioux

That was my thinking as well but wanted input to confirm. So would you (or any other tax experts) also agree with the below : "If taxpayers ceased using the acreage for business use two years prior to sale (and continued to live on property but converted the 45 acres to personal use), then the property as a whole would be included in home exclusion deduction." Thank you for your input. Peggy Sioux