Jesse

Thanks for the help really appreciate the feedback.

According to paystubs his gross indeed is $35,000, that is why I don't understand the "phantom" housing allowance. FICA was actually based on $37,000, only because $2,000 was deferred Comp. If his actual housing does not exceed the $7,000 something that was not received can't be taxable. In 2007 this is his only employment, previously he was a pastor at a local church, so for 2007 he was no longer self employed.

Thank you. This is what I was looking for. Peggy, thank you also, but in this case as cpabsd pointed out the amount has already been subject to SS. What I was questioning is how to report and if indeed it should be subtracted from the wages.

New client is a chaplain for a State of WI prison. He is paid as an employee and FICA & Medicare are taken out of his pay and just like any other employee the state mathches this. $35,000 is reported in box 1 of his W-2. With his W-2 he received a letter that says: To Whom it May Concern: Mr. C is employed as a chaplain with the Dept of Corrections at the XXX Correctional institution. Chaplain C is not furnished a residence by the state and therefore pursuant to WI Statute he is eligible for $1,800 or 20% of his chaplain's salary, whichever is greater, to be designated as the housing allownace. Chaplain C's 2007 earnings were $35,000 and therefore $7,000 should be designated as the housing allowance. If you have any questions, please contact So and So at ####. I called the number and they could not tell me anything except this is what they had been instructed to do by the State. Has anyone else run across this or have any ideas as to what to do? Do I make an adjustment for the $7,000 on his Federal and state income subject to income tax because normally the housing allowance is not subject to income tax but is subject to SE tax? Do I "pretend" he received this $7,000 and subject it to SE tax? That makes no sense at all but I'm dealing with taxes. Do I just say "oh that's nice" and do nothing? Any opinions welcomed!!

In many cases there is not a "primary home" and the children go to Mom's one week and Dad's the next so both are getting the kids up for school, helping with homework, etc. It seems this would be really hard on the kids, but they don't have a choice. Many times it's also very difficult to get the point across to your client, whether it be Mom or Dad, that in order to claim the dependent w/out the 8332 you must have custody > than 50%, and to add to it they have a divorce decree saying they can because they are current on child support. Now you have to explain the IRS doesn't care what the divorce decree says because it contains a contingency. Honoring what's in the divorce decree is legal too, it's just a different court you have to settle in.

Also household employee, such as a babysitter.

A couple years ago my clients Federal refund was intercepted for attorney's fees- the fees were for a divorce lawyer. I don't know if it depends on State laws - this was in Wisconsin.

Simple enough to answer but what are some examples of actual proof that the child was physically in the home? I have a similar case where grandparents have a teenager, how can thay prove that this child was physically in their home from mid February until late Novemeber?

ADESSA, Inc merged with KAR Holdings, Inc and stockholders received cash merger proceeds of $27.85 per share. My client had 1,000 shares and received a check in April for almost $28,000. If the original stock was purchased in 1986 would this be a long term capital gain? If not how would you treat the cash merger proceeds received?