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Sara EA

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  1. Sara EA

    529 PLAN

    Was the student at least half time? First make sure the clients are eligible for the AOC. If so, you want to use the first $4k in expenses for the credit because it is much more valuable. To the remaining $100 of qualified education expenses, add books, room and board, possibly a computer for school. Let's say that total is $2550, or half the distribution, used for qualified ed expenses not counting those used for the AOC. That makes half of the earnings taxable. Your software should handle this. Just be sure not to count the first $4k in tuition used for the AOC as qualified expenses for the 529 distribution.
  2. The IRS will go with substance over form, so I don't think it cares. I wonder about the banks though. I've had several clients who quit claimed their mortgaged homes to their kids. One would think the lender banks would care very much if the home was given away. I guess the parents never told the bank and as long as they continued to pay the mortgage no one was the wiser.
  3. This was a TOD account (transfer on death, not six months later), so the income is her son's and should be reported on his return. He can ask the brokerage to correct the 1099, or just put it on his return. You can file a 1041 and pass it through, which has the advantage of deducting attorney/probate/accountant fees. If you don't the IRS computer may send a notice, but the son will just have to show that the income was reported on his return. I'd let him decide if he wants the 1041 or not. It goes on his return one way or the other, the IRS only cares that the one who got the money reports it, and he can avoid the extra tax prep fee. If there is no court appointed rep, the son can sign as personal representative.
  4. You are correct. In this case you will have a calendar year because a fiscal year can end in any month but December (because December ends a calendar year). All income after the date of death goes on the 1041. This should be an easy one because, provided the executor moves the assets to the estate EIN promptly, you won't have to weed through bank and brokerage statements dividing up what was earned before and after death. It's likely you won't have to do a final 1040 either, unless that person made a heck of a lot in the final 13 days.
  5. When did this happen? A new Reg? Please offer a citation. I have a bunch that could really have used them.
  6. Did you tell your (now former) client how many IRS letters each of see every year because people never bothered to give us their 1095A? She'll find out soon enough. We all have clients who try to cheat in broad daylight. This one hurt because you didn't see it, but of course you couldn't. The forgone fee will be worth the entertainment value when she comes running in with that letter.
  7. State laws on this vary, so it's wise to check their websites. I had a CT trust that became a SC trust when the trustee moved. I have a CA trust that remains a CA trust because the grantor lives there even though the trustee resides elsewhere. If you are talking significant bucks here (say, owe NY or MA $100 or $200 for 50 years) send the client to a tax attorney. They can negotiate with the state, while keeping the taxpayer's identity anonymous. The power they wield is that they know who the client is and the state doesn't, so if the state doesn't reach an amiable agreement on how much back tax they want, they will never find out and will get nothing.
  8. The exception is publicly traded partnerships, where passive losses can only offset passive income of that particular partnership.
  9. Sounds like ATX is doing what UT is: First quarter estimate due 7/15, second quarter due 6/15. Gives a whole new meaning to the adjective "first." I have noticed a couple of states warning that interest is statutory and will be charged if paid after April 15. How can anyone keep track of this?! I'm encouraging my clients to pay sometime in April because we are all used to that date and no one is going to be thinking about taxes in July.
  10. I think printing all the worksheets confuses the client. I've been in the habit of printing the "1040 reconciliation worksheet" in UT, which is the old familiar 1040 because it doesn't bunch all types of income and deductions together (especially last year). I just got a call from a client who was confused by it, when I thought it was less confusing. I don't think anyone but a tax pro could follow a taxable Soc Security worksheet, or taxable state refund, or AMT worksheets when they aren't subject to AMT. I do print ones like the Q dividends and cap gains worksheet so they can see that they saved money and the QBI deduction worksheet so they can see why they are not getting the full 20 percent. Ever get a client who self-prepared last year with TurboTax and brings you 88 pages of gobbledeegook from last year's return when all they had a couple of W2s and maybe bank interest? I just don't think more is better, unless you really charge a lot and want clients to think they got their money's worth.
  11. I don't know how people bill in short time increments at all. Don't you spend so much time keeping track of time that it's hard to get any work done? We try to keep track of our time but actually bill clients by complexity. I start a return, get two must-take phone calls, a client or two drop in with docs and questions, the printer jams, a colleague needs help, the boss drops in to vent or tell a joke.... Three hours later how do I know how much time I devoted to the return on my desk? And did I have to keep track of the time spent on those calls or drop ins to bill those clients? Do you keep a stop watch on your desk? I once got the probate filings for an estate, and the attorney's bill actually listed the time spent on opening the mail. I am really curious about how those of you who bill in short time intervals do it.
  12. I have done a lot of these. You have to report everything on the decedent's final return if the 1099 is in his/her name because the IRS computers will be looking for those numbers. Then back out what belongs to the estate. You have to do these calculations manually. I identify the negative amounts as "to be reported by estate" and the EIN. Then on the 1041 I put the payer as "reported to" and the decedent's SS number. Charge a lot!
  13. I don't want a check! I don't have a mortgage and can afford my living expenses. Give the money to self-employed people whose businesses are ordered closed, or to school bus drivers who make so little and won't work for months, to waitstaff, to people who can't work because their child care centers closed. The money should go into enhanced unemployment benefits and relief for small business owners. Instead of thinking of creative ways to get people money they might not need, let's convince the powers that be in DC to get it into the hands of those who need it most.
  14. Don't bother with the gift splitting--that gets complicated just showing each spouse where to sign one another's and their own return. Unless your client is likely to have gifts and a residual estate in excess of $23 million, he is in no danger of ever owing gift and estate taxes. So file a single return for him and be done with it. Better check the state though--some have much lower thresholds than the feds.
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