tax1111

Taxpayer is a US citizen living and working overseas. He earned foreign compensation $360k in 2020. I used to use only foreign tax credit for his returns. But now, it seems that if I apply foreign earned income exclusion $107k first and then apply the foreign tax credit for the unexcluded amount, it lowers his tax by $1k.
My questions is:
1. Is there any drawback for using both form 2555 and form 1116 vs. only use form 1116?
One thing I can think of is that if use both forms, foreign tax paid allocated to the excluded income is lost. Any other drawbacks?
2. also, he will be required to use form 2555 in future years (with or without form 1116 depending on his income level) unless he elect to revoke the form?
3. is it normal to have a better tax outcome when using both 2555 and 1116 forms than only using form 1116?
Thank you so much!

Thanks everyone for your help!

Taxpayer broke up with his wife in 2015 and has not been able to know where she is since then. He has not filed for divorce, though. He also has not filed tax returns since then and now he wants to file the back tax returns.
My questions are
1. Since he knows nothing about whether and how his wife filed her own returns, must he assume the worst scenario, i.e., the wife itemized?
Or he can claim the more beneficial deduction whether it is standard or itemize? 
2. is there anything else needs special attention on?
Thank you!

1 hour ago, Pacun said:

If it is a Roth IRA older than 5, nothing is taxable I think.

Thank you so much!

1 hour ago, jklcpa said:

Pub 590 has a complete chapter on Roth IRAs, and you will use form 8606. I'd suggest you review both the pub and the form's instructions.

Thanks as always, Judy!

The taxpayer took distribution from roth IRA account. He is under 59.5 years old and the money has been in the roth ira accounts for over 5 years. 

The 1099R has empty box 2a and 2b is checked. box 7 code is J.

My understanding is that the earnings portion needs to be taxed as ordinary income and is subject to 10% penalty.

Am I right here?

If I am right, how can I figure out the amount of earnings based on 1099R?

The distribution is not a total distribution, so I guess I have to prorate the earnings based by total earnings of the roth IRA account when distribution was made times (distribution amount divided by total amount in the account when distribution was made) ? 

How can I get these information though? 

Thank you!

15 minutes ago, Pacun said:

Change the code from G to something else. 

Or you will have to make another entry for the conversion and pay the taxes.

Thank you!

5 minutes ago, Lion EA said:

Are you sure it's a fully-taxable pension? Could it be a Roth 401(k) to a Roth IRA direct rollover?

1099r shows taxable amount in box 2a the same as box 1 amount. Can I assume it is from traditional 401k plan rollover to roth ira or I need to confirm with client about this? Thanks.  

code in box 7 is G. box 1 and box 2a shows same amount. But when I input data as shown on the 1099R into Drake, it shows 0 taxable amount on 1040 line 5b. This is a direct rollover from pension to roth IRA and it should be taxable. Can anyone help fix this issue?

Thank you!

27 minutes ago, jklcpa said:

Did the client receive a NJK-1 from the partnership?  If not, if you complete the Partner's Reconciling Worksheet A?

NJ doesn't split the different types of partnership into its various components like the Federal return does.  If you look at the reconciling worksheet, you'll see that basically all the items on the K-1 are kept in the category of partnership income or loss, so it would be wrong for you to enter that loss directly on D/8949. 

This pdf is from the NJ Dept of Revenue's site that should explain this more fully:

git9p.pdf

This is really helpful! Thanks so much! The partnership didn't provide NJK1. 

There is about 180k capital loss on a partnership k1 and taxpayer is NJ resident and has 700k capital gain from other sources.
If I input the capital loss in 9a of federal k1 screen of tax software, the amount flows to NJ return as a NJ k-1's line 1 item which is general business income/loss and can not offset other capital gains. That does not sound right to me.
Does anyone have experience on how to deal with this?
Can I not input on K-1 but rather create a transaction on 8949 form to reflect the 180k loss there which will flow to NJ return as capital loss?
Thank you!

Thank you so much!

24 minutes ago, Gail in Virginia said:

Did the client not have that information on previous returns?  That is not a new requirement.  The new requirement is the date of the decree specifying the alimony.  At least that is my understanding.

He has not filed tax returns for a while 

It seems that Drake software requires ssn of ex-wife of one client who pays alimony to her. Is there a way to bypass that? the client can not find that info. and he is not able to contact his ex-wife. 

Thanks. 

a US green card holder who  lives abroad all the time has rental property income from NJ and needs to report it on NJ 1040NR.
Meanwhile, he has capital gain from US stock sales. He needs to report it on federal return but does not need to report the gain on his NJ 1040NR based on the sourcing rule, right?

taxpayer has $5000 dependent care benefits in w2 box 10. She only used about 3000$ in 2020 and says the rest will be reimbursed for 2021 dependent care expenses.
I understand that forfeited DCB usually needs to be added back to taxable income. But as employers are allowed to grant grace period and flexibility for DCB for 2020 tax year, should we treat this unused DCB different from usual forfeited DCB, i.e., treat it as nontaxable?

43 minutes ago, jklcpa said:

Yes, that is correct.  Also exclude from Sch A any amount claimed as SEHI. 

Thank you!

15 hours ago, Slippery Pencil said:

Medical insurance paid is deductible on Sch A.

thanks

12 hours ago, Abby Normal said:

Since it's a 1095-A, you have to subtract the premium tax credit to arrive at the amount paid for health insurance. You can't just use column A.

Thanks. I should subtract column c from column a and also subtract addtional ptc on form 8962 or add back ptc repayment on 8962, right?

is premiums paid on 1095a deductible on schedule a? Thanks. 

I did not find a line item that allows me to input the solo 401k employee contribution amount to be treated as deductible on NJ 1040 form. 

But based on instructions, 401k contributions are deductible in NJ. Does that include all types of 401k such as solo 401k? IF so, where can I input the amount on nj 1040? 

Thanks. 

Does NJ treat rental loss in the year of sale of the property the same as federal, i.e. all losses or losses carryover are released?

Thank you!

Thank you! I will follow the instructions to be safe.  

Thank you very much for the help!

Taxpayer filed 2019 federal return through another preparer and now turns to me to file NJ and NY return. Does ATX Max allow just filing NJ and NY returns without filing federal return? Also, when will efile for these two state open on ATX?

Thank you!