Sara EA

Tom, you only have to amend if you included the payments in income.  The IRS statement pretty much says that none of these payments is taxable.  I think they did the right thing for "tax administration."

While you don't have to file the 1041, if there are probate and legal fees that are substantially more than the income and can benefit the beneficiary, go ahead and file.

And after all the trouble just opening the notice from VA, it tells you to go to their website to get your 1099G!

Income is taxed in the year received, so the divs will be taxed to the estate.  Now to solve the $10k mystery.  The taxpayer must have had some kind of basis in whatever it was.

Just make sure he had some foreign income, details of which should be buried in the brokerage statement somewhere.  The credit only applies to foreign income so the carryover will reduce the US taxes on that income.  I had a client with several thousand in FT credit carryovers who kept questioning me about why I wasn't applying them.  He had liquidated all his mutual funds and had no foreign income, so the carryover was wasted after ten years.

Of course it's not illegal to merge personal and business accounts, but it sure creates an accounting and tax audit nightmare.  Was that gas fill up for the business van or the wife's car?  The trip to Staples for back-to-school supplies or office copy paper?  We have clients whose monthly bank statements are four single spaced pages of everything from morning coffee to bars to the occasional business website bill.   Their reconciliations cost a lot because they take so much time.  Also makes it impossible to tell how much money you're making or spending--should you raise prices, buy that new piece of equipment?

He should just apply for an EIN--it's easy enough to do.  Best argument in favor is that he won't have to give his SS number to clients.  Operating without an EIN makes me wonder if his business banking is combined with his personal, which is a big No No!  

Best to file an extension.

This guy does not need or qualify for HOH.  To satisfy due diligence, you need documentation that son lives with him.  What do you list on Line 5 of the 8867?  Report card?  Doctor statement?  Mom's testimony isn't listed as one of the supporting docs.  IRS doesn't usually complain unless both parents claim the same kid, but still....

Years ago SSA sent people annual statements showing their projected benefits calculated on their past contributions and projecting their current income to stay the same for the rest of their working years.  It's amazing how many business clients found religion and began showing more realistic profits.

Like others, I would ask a lot of questions of this guy who supposedly supports kids on $12k a year in VA.  He certainly doesn't need HOH status as single would yield the same result and prompt less suspicion.  He can't supply more than half the cost of the household on that income.  I'd have a heart-to-heart with the guy and disengage.

In addition to the Code, the instructions for Form 5695 do say when installation is complete.  Don't know why FAQ say differently.

From IRS FAQ"  "The credit applies for property placed in service after December 31, 2021." (emphasis added)  Since their solar was not in service in 2022, but was paid for in 2022, looks like no credit at all.  The client should go after the installer for a price break, if that who was responsible for the permitting.

A taxpayer with an installment agreement will also have a state refund sent to IRS to apply to the balance.

On 1/16/2023 at 9:43 PM, cbslee said:

If the IRS issued the refund how did the state take it?

All states connect with IRS for amounts owed to them (and IRS connects with the states).  Thus if there is a refund from one but unpaid tax with the other, the refund goes to the overdue payment.  In my client's case, the state had recorded the higher income from the amended return but not the higher withholding, told the IRS but not the client that money was due, and the IRS refund was diverted to the state.

Only donations over $5k need an appraisal.  I think the amount the charity received in a sale only applies to cars, boats and airplanes.  Anyone ever had a client donate an airplane?

Since the daughter had no income, did parents support her too?  If so, she can also be a qualifying relative who doesn't have to live with the taxpayer.

Look at the support test.  Did Mom provide more than half of daughter's support?  If not, she's neither a qualifying child nor a qualifying relative regardless of student status.

The same thing happened to a few of my clients.  No letters, nothing, just that notice on the website, like taxpayers are in the habit of checking irs.gov everyday like they check the weather.  One client got an amended W2 in July 2021 for tax year 2018 that showed huge increases in income and withholding.  There was a big IRS refund due, which still hadn't come after 18 months.  I assumed the return was in the paper backlog in that cafeteria.  (The amendment had to be paper filed because of the three year limit.)  It turned out that the IRS had issued the refund but the state took it.  The state recorded the higher income but not the higher withholding.  Still working that out.  Moral:  It's not always the IRS's fault.

I think you need the exact time.  As volatile as crypto is, it could have traded between $70 and $150 that day.  Bitcoin, for example, sometimes seems to be going up at 9AM but by 5PM is down over $400  (and there is no trading day so who knows where it was before 9 or where it will be by midnight).

The really tricky part about valuing crypto is that the value changes by the second or nonosecond or something, and it trades 24/7.  No looking up the closing price like with funds, or averaging the day's opening and closing prices for stocks.  (One appraiser uses the average day's high and low of three crypto exchanges that exchange into dollars and then averages the averages--not sure if that cuts the mustard.)  I would put the onus on the donee to research the price when the  crypto left his/her wallet.  If over $5k, there are few "qualified" appraisers to sign the necessary paperwork, so good luck with that.  Few charities are equipped to take crypto anyway.  For those that do, the client could get help from them to determine FMV.  So yes, I am pretty much saying that it is NOT OUR PROBLEM to figure this out, other than making sure the client follows the rules (and explaining over and over that basis has nothing to do with it).

I think you're right.  If the value of the pension is determinable (e.g., there's $x in it and there will never be more), then FBAR is required.  If not determinable, like the client gets $x each year for life, then no FBAR.

Yes, and she will receive an SSA-1099.

To condense what others have rightly noted, the deceased never owned the house, the trust did, so neither he nor his beneficiaries had any basis.  The trust got step-up when it received the home.  When it sold, it had a gain of the difference between the net sales price and its basis.  The gain is what will be distributed to the beneficiaries.

I don't think there's a box on the 1099R to indicate a qualified contribution.  (Box 7 won't do it because there is no room for the dollar amount.)  At any rate, typically the fiduciary sends the CLIENT the check, payable to the charity, and cannot know if the client ever turned it over to the charity.  In UltraTax you enter the 1099R as usual and below there is a screen to enter the Qualified distribution and amount.  It enters QCD to the left and subtracts the amount from taxable income.  Does ATX have a code line for this?

Two tax breaks I wish had been extended are the charitable contribution deduction for nonitemizers and the increase in expenses eligible for the child care credit.  I did not find abuse of the deduction for charities and was in fact surprised that so many clients said they gave zero.  The maximum expenses allowed to calculate the child care credit started at $2k back in 1976 (and that didn't cover the cost of care back then) and increased to only $3k along the way.