Sara EA

Basis is DOD value. You will have to look at the broker statements to see if basis is or is not reported to IRS. If it's not, the IRS assumes the gross sales price is all gain so you will have to file a return to show basis. If the stocks will be sold at a loss, you want to file anyway so the beneficiaries can use it.

Another reason why we don't use ATX for our main program. UT separates the returns and even automatically labels them SMITH TP and SMITH SP, but of course it costs a million dollars. MFS works when there are significant medical expenses that can be attributed as paid by the lower earning spouse so that 7.5% ding isn't so awful. Used to work sometimes when we still had the 2% AGI misc Sch A deduction. In CT, the property tax credit essentially doubled if MFS. which sometimes offset higher federal taxes. Now we have such a high standard deduction that many couples can't exceed it filing jointly but one may by filing separately and taking all the itemized deductions while the other takes the $12,200 standard. In fact, that sounds like it might work for a lot of people and I should be running the optimization a lot more than I do.

You are right that the trust is now an irrevocable nongrantor trust. Whether it is a simple or complex trust depends on what it distributes. A simple trust distributes all income but no corpus and no charitable distributions. A complex trust is one that isn't a simple trust (that's the real definition!). A trust can be simple one year and complex the next depending on the character of the distributions. If yours is only distributing income this year, it is a simple trust. When it dissolves and distributes both income and corpus, it will be complex that year.

These expenses can be considered by the trust for bookkeeping purposes, but not as income tax deductions. When the trust was a grantor trust they weren't deductible, and now that it's not a grantor trust they still aren't deductible. The property taxes can be deducted as well as legal and accounting fees. Trusts almost always have to use a calendar year. The only exception I know is if a qualified revocable trust (that becomes irrevocable upon death) makes a Section 645 election to be treated as part of the estate, in which case the estate reports the income and deductions. (Sorry, carrying costs like insurance and HOA fees aren't usually deductible for estates either.) If the property had been rented it would be another story. Perhaps someone else knows how a trust can use a fiscal year; I can't think of anything else.

Does anyone know why CA is proposing this? I can imagine the state does get lots of complaints about taxpayers who walk into one of the chains or seasonal places with a couple of W2s and walks out with a fee of $600 because they had HOH and EIC. Those places know these clients get free money from the gov't and definitely take a share. Since the IRS is pushing free file this year after they noticed that only 2% of eligible taxpayers use it, I can see CA following suit. A PR campaign from the tax dept could accomplish the same end of making people aware of their options. I don't think the pricing requirement will help people at all because they don't know what all those additional items are. They might know they get some kind of credit for their children but likely have no idea what the additional child tax credit is. If they put some money into a 401k they won't be aware of the retirement saver's credit. Many probably don't realize it takes another form to get a state credit for car taxes paid. All of these forms add to the fee, but the client walking in the door doesn't know s/he needs them. So with their couple of W2s they'll think they will pay the basic fee and still be surprised by the $600 final. The above verbiage does state we only have to disclose average fees to potential clients, not existing ones.

IL will compute tax on total AGI and give credit for taxes paid to the other states up to what IL would have charged. CA and NY likely have higher rates than IL, so your client will only get partial credit for those states. The other states will calculate tax on the income earned in that state at the rate that applies to the taxpayer's AGI. For example, someone making $6k in NY would probably have no taxable income there, but someone making $100k would be taxed at over 6%, which is the rate that will apply to the $6k. I don't think WA has a state income tax, so all of that income will be taxable in IL with no credit. Getting the logic of this doesn't make it easier. I always have to fight whatever software program I'm using to get it to come out right. When I was at HRB there was an "all states specialist." I want one of those!

Injured spouse. Be sure to file one for the state too. I've done this for years for a couple in which the wife has outstanding student loans. He always gets the refund, but it takes awhile.

A 1041 is an INCOME tax return. Unless the will specifically requires bequests to be paid out of income, they are usually paid from corpus and therefore not deductible from income. Charitable donations can only be made if specified in the will. They too are usually paid from corpus unless the will specifically states to pay from income. I think the source of confusion is that the 706 addresses assets and has its own rules for deductions, while the 1041 addresses income and expenses paid out of income.

I think the only time a phone number is required by IRS is when a taxpayer is having a balance due debited from a bank account. CT has had a space for phone numbers for years, and more recently they added a spot for email. I never filled out either. A few years ago at a state liaison meeting someone asked the DRS speaker why CT was asking for this info while the IRS was advertising all over the place that they will not call or email. He did not have an answer. I notice that taxpayers in lots of states can now request an IP PIN. Is anyone advising their clients to apply?

You add it to the student's income, not the parent's. However, since it was all used for qualifying expenses you can just use $2200 as qualifying education expenses or whatever was spent (make sure you see receipts). I second cbslee's suggestion to just take the tuition and fees or Lifetime credit this year and save the AOC for years when expenses are higher.

Property taxes are not passed through separately. The estate will calculate its income and deductions and pass the net income through to the beneficiaries. If it held rental property, those property taxes are deducted from rental income on Sch E. If it sold the decedent's home and paid property taxes at the closing, those taxes go on the estate's 1041 subject to the $10k limitation. Please tell us specifically what property taxes the estate paid.

The data rolls over in UltraTax (at least it did in the past, haven't checked the 2019 version yet). There is a diagnostic if the license has expired. Speaking of which, some states have six and seven years between renewals. I assume aging is not allowed during that time.

Be careful here. Employees who choose to become IC lose benefits like health insurance, pensions, paid time off, unemployment and disability comp. They really have to think if the trade off is worth it. This discussion is enlightening. Most of the time I see ICs who really should be employees, and most of the employee "business" expenses I saw were bs. Among my clients who were most affected by the elimination of the 2% category were outside sales people who drove zillions of miles with only partial reimbursement and those who had huge brokerage fees.

I don't understand why some of these changes were made, particularly those extenders reinstituted for a closed tax year. People weren't marching in the streets demanding the education adjustment back, and with the higher standard deduction, even if folks could include PMI many still wouldn't have itemized. Lobbyists? I thought when the TCJA was passed that these things were taken away to help pay for the lower tax rates, and the higher standard ded helped mitigate the pain. Now we have low tax rates and all the tax breaks back--watch out deficit!

Over a decade ago there was some big change in our state tax laws including filing status. A local employer thought not to trouble employees with new W4s and instead payroll revised them to match the new rules. For some reason lots of people became HOH. I had two clients from that employer and both owed lots of state tax. Believe it or not, the employer paid their underwithholding. Yet another reason for employers to stay out of the W4 business.

TT and freefile have been around a good long time, yet the percentage of taxpayers using paid professionals has hovered just under 60% for years. Perhaps young tech-savy people will never use us so they won't replace the older and middle-age clients who would never touch their own returns. I actually had a couple of young guys who chose to do their own partnership return after the first year to save money. (As a professional, I didn't touch a partnership return until I had 10 years of experience under my belt and a zillion courses on the topic.) They have no fear of technology until the audit letter arrives. After another year or so under TCJA, I do foresee more clients who no longer come close to itemizing drifting away too. That said, the tax rules have gotten insanely complex, especially for the self-employed, and lately they change on a weekly basis. How many Uber drivers even know what QBIA is? Heck, people can't even do their own W4s without professional help anymore. (For the first time ever, we are going to start charging for the new version.) And more and more people are willing to pay for things they can do themselves like car washes, lawn care, food delivery instead of driving to the grocery or McD's to get it yourself. So I don't see all doom and gloom but think we'll have to wait to see how it plays out. Disclaimer: Most of our clients are like Edsel's with complex investments, businesses, trusts, etc. If we had more of an early-season crowd I'm sure I'd think differently about the future.