Sara EA

If the trust has more than $600 of GROSS income, then yes, a 1041 must be filed and K-1s issued to the grantors.  This would be the case if income-producing assets like bank and brokerage accts, etc. are titled to the trust  using the trust's EIN.  If rental properties are titled to the trust, rental and income and expenses go to the trust.  What are your clients putting into the trust? Does it have an EIN?

Do they need all that depreciation?  Opt out of bonus and use just enough 179 to offset operating income.  You don't mention guaranteed payments, but I believe they are always subject to SE because the partner actually received that money.

There may be a 1041.  It depends on what assets are placed in the trust and whether tax docs are reported in the trust's EIN.  If they are, the trust has to file.  There is an election on the 1041 to report everything on the grantor's return, so instead of a K1 there is a statement showing income and expenses.  Filing is still required though, or the IRS computer matching programs will discern a mismatch and generate a letter.

PA has an inheritance tax, and I'm not sure if revocable trusts that become irrevocable at death escape it.  Find out why they are considering a trust.  Did they go to one of those seminars that convince the attendees that they need to pay the lawyers a big chunk of change for essentially no benefit to them or their heirs?  I have seen many people who really don't have much set these things up and really can't afford the 1041 annual tax filings.  This is a legal decision though and you are right to refer them to an attorney.  Just make sure s/he doesn't offer seminars.

Is half of their combined income over 400% poverty?  If so, it all gets paid back in most cases, or they are eligible for a tiny subsidy.

The SSA usually keeps the SS# active until the final return is filed, then they deactivate it.  Once they do, there is no way to reactivate it.  You will have to mail the amendment.  If they are due a refund, warn them to expect it in a year or so.  If they owe money, no problem.

You are correct that if the properties are treated as one enterprise, actual and suspended losses on one stay suspended until all are sold.  That's one reason I never make this election. 

Doesn't sound like a partnership to me.  Your client was merely an investor.  The money received on his investment is cap gain.  He put in $1.09m (58%), partner put in $775k (42%).  Client is getting more than his share of the sales price.

The trust doc provided more info than the original post--lesson learned that we must see it!  Still confusing though.  If the wife had power of appointment, she could do whatever she wanted with the assets, yet the trust doc said she could only withdraw up to 7% principal each year.  Rather than drown in the legal terms, just include it in her estate since she won't being paying estate tax anyway.

None of this goes in the wife's estate because she did not own the assets, the trust did. This is an irrevocable trust that gives her the right to income (I think, not clear from the info given) and a limited amount of principal.  Upon her death, the assets owned by the trust go the beneficiaries and the trust dissolves.  The 1041 will have three beneficiaries--the wife's share of income received before death and the two children's share of income each received after her death.  If the assets have been distributed, you can put the property distributions on the 1041 at the trust's basis to zero it out.  No income there--the 1041 is an INCOME tax return.

Are you actually filing a 706?  The wife would have to have $12 million in assets to necessitate one.

You have to enter ALL the divs reported on the 1099 and then back out the ones received after death.  Otherwise the computer matching will result in a letter from IRS.

You have to enter the entire proceeds, cost, etc from the consolidated 1099 as usual.  On the next line I put "IRD reported by EIN XXXXXX" and enter the totals pertaining to the sales that occurred after death as negative amounts.  Stick with the costs reported on the 1099 here, as you just want to end up with the gains/losses from before death    On the 1041, I enter the brokerage name and "IRD reported to [deceased's SS number]."  Use the date of death value as the cost.

You have to do the same thing with the dividends and interest if any.  Be aware that any dividends paid after death on a stock that is later sold may be short-term if the div was reinvested into the stock after death.  I charge A LOT for these returns.

I think the mileage would be a start-up cost.  He closed a rental enterprise and is starting a new one.  Travel would be a deductible expense if already in business, not a capital one. The capital investment is a different category.  Here's a quick reference:  https://www.irs.gov/newsroom/heres-how-businesses-can-deduct-startup-costs-from-their-federal-taxes

He will owe NY tax but will get a credit in KY, so total tax paid will be roughly the same.  There will be extra cost for the NY return though.

Take a look at IRC Sect 6103.  For joint returns, both spouses are entitled to copies of the joint individual tax return.  For the partnership, Section 61403(e)(1)(C) states copies can be provided to:

in the case of the return of a partnership, any person who was a member of such partnership during any part of the period covered by the return;

There is a later section that states the requesting partner cannot get the parts of the 1065 that relate to the other partners, e.g., K-1s.  If their info is listed within the body of the 1065, white it out before copying.

So you can provide either or both with copies of their 1040 and 1065. 

I too am due for EA renewal next year and will pay whatever they want because I NEVER want to take that exam again.  Fortunately, my employer pays for continuing ed.  I renewed my NAEA membership this year but think I won't going forward.  It's expensive for the benefits received, which to me is pretty much the journal.  I love their journal, but their meetings where I can network with other tax pros are so far away I'd need a hotel stay.  I find their forum so-so; many posters try to be helpful but others seem bent on showing off their knowledge and putting others down.  Nothing like here, where nearly everyone freely shares, emphathizes, and truly tries to help.  No one cares to be the smartest person in the room.

Clients who do their own accounting don't realize that you may have to do hours of cleanup.  I had a client whose relative did the books, and it took me a full week to do it right.  (Dunkin' and McDonalds charges listed as "meals and entertainment"; cigarette purchases and wife's gas station fill ups under transportation, and on and on).  Tell your client no discount or price reduction until you see how long it takes you to clean up.  He might not save a dime, and it might just cost him more (especially if he uses QB online, where changing things takes a whole lot longer than original entries).

Your clients will not lose the $1400, only the $500.  Since the daughter got an extra $1400, the family comes out ahead $900.  Amending the one return and paper filing the other will take a year to process, and then the IRS queries will take months longer. Is it worth it?

There have been many posts here and all over the tax blogs about students who graduated in 2021 and claimed themselves, so they got the $1400.  Their parents already got the $1400 for that student based on their 2020 return.  No paybacks required.  Look around to see.

I had an instance a few years ago when a student sold her eggs to an egg donor place and didn't tell her parents.  She got a 1099 and the s*** hit the fan come tax time.  I wouldn't automatically rule out identity theft, but since your client's daughter got and cashed the check I think Lion's suspicions should be considered.  Will the parents save at least $1400 on their return by claiming her?  If not, I'd let it go and file their return without her.  If she incorrectly claimed herself, let the IRS handle that one.

I don't know which version iphone I have, but I've had it for quite a while.  I don't have a notice for an update, but I went to settings and it said an update was available, so I'm installing it now.  Thanks for the heads up.

In the bill the senate just passed (making it likely to become law when the favorable house votes on Friday), it looks like the energy credits for EVs will be applied at the dealership--leaving tax pros and the IRS out of it.  YEA!!!  Of course, buyers will most likely have to provide the dealership with tax returns to verify AGI --not sure if I'd want to do that.  Also, they will only be able to provide the return from the prior year, and I don't know if the bill will determine eligibility for the credits on the prior or current year AGI.  Yes, we will have to learn a lot about the application of the law to explain to clients, but at least we don't have to determine if the car or buyer qualifies and calculate the credit.  This is a rare social policy initiative that congress hasn't dumped on the IRS; they too must be relieved.  Now if they would just get EITC out of the tax administration system and into social services where it belongs....

First look for a reason the returns were possibly pulled for further examination.  Did either client claim the recovery rebate credit?  Perhaps purchased insurance through the exchange and didn't include Form 8962?  Those returns that need a person to review are taking forever.

A full-time student under age 24 who does not provide more than one-half of her own support cannot file independently!  She must check the "can be claimed as dependent by another" box and is only eligible for the nonrefundable portion of the education credit.  (I sometimes do this for parents who make too much for the credit and the dependent has a tax liability that can be offset by the nonrefundable credit.) 

While hand-written charts, spreadsheets, even software may work well, they all require extra steps.  You have to go to whatever system you've set up and mark off each step.  Ours is a more visual system:  incoming work goes in the inbox, then to the "needs info" box if necessary, then to the "awaiting sigs" box, then to the "ready to efile" box, then to the "accepted and ready to scan" box.  No extra steps.  I for one would forget to go to the master system to record each step, especially during the busy season.

TP A is a limited partner and is subject to SE tax only for services he provides to the partnership.  He doesn't provide any services, just money.  Hey, if hedge fund managers pay cap gains tax on their enormous earnings (really derived from services), TP A should get the same treatment.

When you are working 110 hours a week like jasdim or have a five-month turnaround time like Lion, it is time to hire help!  We all get calls from clients wanting to know if their returns are done (even if they dropped off yesterday).  In our office we avoid the guilt by having the receptionist who answers the phone ask if we have called them.  When they say no, she just tells them we will call with questions or when it is done.  This avoids the guilt because we don't get those calls!  (To emails, I just respond that they are in queue.)

In Lion's case, perhaps you can alert those with particularly complex returns that they will go on extension because their work will take up too much time during season.  We do have a group of returns from a family that it crazy complex (corps, s corps, partnerships, multiple trusts), but they always bring their info to us in January.  We get them done before things start getting crazy in mid-Feb.  We don't always have their individual data in January, but at least the hard part is done early.  Can either of you convince some clients to aim for January?

I am serious about hiring help.  The hard part is getting competent help.  We have too many clients and not enough of us who know what we're doing (and just as important, who know what we don't know).  We have hired several preparers but have discovered that it takes a few failed tries before landing a good one.