Sara EA

Some states are really aggressive in residency audits, especially if the person maintains a residence in the nonresident state. If state budgets start getting pressured by all the cuts being made in Washington they may all start looking harder. Your TX/WI friend may just have to produce every bank and credit card statement, utility bill, gas receipt, doctor visit history, etc to prove where he is spending most of his time. Residency audits are nasty. I agree that NY just doesn't know about the rental income. You have to include the income now, but the depreciation schedule will be a dead giveaway. "Date placed in service" will not coincide with the current tax year. The client should hire a tax attorney who will calculate the amount of unpaid taxes and make an anonymous offer to the state. Basically they approach the state saying that some unnamed individual may have $X in unreported income, owing $Y in taxes, interest and penalties. The person may be willing to pay $Z to settle the debt in full (Z < Y). The state may negotiate a bit but often accepts because if they don't, they have no idea who the person is and will likely get nothing.

Adults have tax milestones too, like when they turn 59 1/2 and 65.

A trust beneficiary is a related party to the trust.

Were the charities actually beneficiaries? Most often bequests are made to charities, e.g., give $10k to my church. Any charity of person for that matter that receives a bequest does not get a K-1. K-1s go to those who share in the income and expenses and remainder of the estate.

You don't need an IRS account to make a payment. At IRS.gov there is a link to make a payment that does not require sign in, just name and last year's filing status I believe.

The $5200 was most likely a tuition assistance employee benefit from Starbucks, not a scholarship. It can be used for more than tuition https://www.irs.gov/newsroom/employer-offered-educational-assistance-programs-can-help-pay-for-college That said, Pub 970, figure 2.1, makes clear that the same expenses covered by the employer-provided tuition assistance can't be used for the education credits. Seems like you have a taxable scholarship of $3200 - expenses for books, equipment, etc. Note that the choice to include a scholarship in income isn't that simple. The terms of the scholarship must specify that it may be used for nonqualified expenses like room and board. Most scholarships specify that they are for tuition only. I once researched whether a particular scholarship allowed nonqualified education expenses and that info just isn't out there.

A trust can be simple one year and complex another, depending on what it did with its income that year. A simple trust has to pass through all income to the beneficiaries so it will have none of its own income to offset with a charitable donation. If the trust document allows and it made a charitable contribution out of its income, it will be a complex trust that year.

The trust may have been closed on paper but not for tax purposes if it is still collecting income in its EIN. If the trust is closed and the money is going to the beneficiaries directly in their SS numbers, no trust return required. "$398K early distribution from IRA with NO tax withheld. They bought Bitcoin with the proceeds. You can't fix stupid." To use an interrobang, they did WHAT?! Or to borrow from Scarlett O'Hara, God's nightgown! Hope they are ready to sell a lot of that bitcoin to cover the immense tax bill. Reminds me of the client who took a lump sum for his wife's generous government pension that could have sustained them for life because he could do so much better investing it. (Said he, who already had $400k in long-term cap losses, being written off at $3k per year, evidence of his investing prowess.)

Did you ask him how he got his return done in the past?

A Sch A deduction would be of no benefit to the majority of retirees who don't itemize, plus it wouldn't reduce AGI for state tax calculations. I've pondered why the 1099R doesn't show a QCD. All I can come up with is that most IRA custodians make the check out to the charity but send it to the taxpayer to pass on. Since the custodian has no idea if the taxpayer did so in a timely fashion, they wouldn't be able to put the amount in some box on the form. Any other ideas?

Not all the nursing home expenses are deductible. Some nondeductible personal expenses include phone, cable TV, and hairdresser.

And what are all the people who can never find their SSA1099 going to do now? It was fairly quick and easy to head to the local SSA office.

No. This is a donation of a partial interest in property. See Pub 526.

Most likely there is a lot more to this case than just failure to file. CI investigates major crimes like fraud, money laundering, narcotics--things that land the perpetrator in prison. The only failure to file cases listed on the website as part of their duties are those jerks who claim income taxes are illegal. I've sat through several presentations by CI and learned that these people carry guns, often work with the FBI, and mean business. That said, do not discuss the case further with your client. If you do and she is called to testify, anything she tells you is not privileged as it would be with an attorney.

It can't. Just report the income on the estate return, noting "Reported to xxx-xx-xxxx." If there was withholding, then you'll want it reissued. Let the retirement plan trustee decide to whom it should be issued.

It depends on how the assets are titled. If the trust has an EIN and bank accounts etc. are reported to that number, the trust has to file a 1041. It can choose to pass all income and expenses to the grantor via a statement attached to the 1041.

Scholarships are generally nontaxable if used for qualified expenses. (Only those used for room and board, travel, etc. are taxable.) You don't have to report anything. If the AOC had been claimed in the prior year and reduced the qualified expenses, you would have to recapture some of the credit, but that isn't the case with your client.

Definitely read the trust docs. You might even end with the A-B trusts that used to be the way to go when the estate tax exemption was small.

Some states don't require payment if you owe less than $1 to $5, depending on the state. I don't think that's true of federal income tax.

As long as the distributions to charities come from income and are specified in the trust document, they are deductible. I cannot imagine why the trustee would want to pay the taxes for the beneficiaries, who may end up receiving a lot less than if they paid the taxes at their own rates. The only way to do it would be to make no distributions, pay the income tax, and then pay the beneficiaries the next year. Does the trustee understand his or her fiduciary duties?

We have had clients who brought some situation to us and we advised them to see their attorney. They admitted they didn't want to pay an attorney, which is why they called us!

The tax code has always changed frequently, so nothing new there. (Remember the year the ACA was introduced, the same year the expense/capitalization requirements were changed? For experienced tax pros, that was almost like starting over again.) Preparer requirements have bounced around a lot too. I think what has kept me engaged is that I have always worked for a firm, never self-employed. No worries about E&O insurance, ordering supplies, IT security, etc. Of course I pitched in with some of the tasks of running a business, but for the most part I was able to focus on tax research and preparation, planning--you know, the skills we acquired to enter this business in the first place. I like taking courses (an academic at heart), so required CEs were never a burden. The biggest complaint I can think of is the long hours during tax season, which repeat as Oct 15 comes around. That said, I have finally retired! Time to have some fun and read more books. I will eventually volunteer for VITA or AARP, but first I want to get organized around the house and do some things I always wanted to do. I will depend on this board to keep me in the loop so my tax knowledge doesn't fall by the wayside.

We don't usually charge for answering questions unless the response takes more than a half hour. It's difficult to set a hard and fast rule. One client has a $2k return and I don't charge him for responses that take time. Other clients are needy and contact me several times throughout the year. I bump up their tax prep fees. Some attorneys are now charging their time in 5-minute increments. (And 6 minutes = 10 minutes billing.) How could anyone keep such exact track of their time and still get any work done? I saw an estate bill once where the attorney charged for 10 minutes opening mail. It probably took him two minutes to track and record that blip of time in his day.

Isn't that boring?

Our local TV news is out of DC, and last night the rolling list of cancellations showed that federal government offices would be closed today. Remote work was in place for those who do it. The snow didn't stop until very late in the PM so I guess they still had to clear roads and walks. Try again tomorrow. Remember that Thursday Jan 9 is a National Day of Mourning in honor of President Carter so federal offices will again be closed and no mail.