TexTaxToo

On 5/20/2022 at 3:45 PM, TexTaxToo said:

When the IRS announced that anyone could now get an IP PIN, they said:

• The IRS plans to offer an opt out feature to the IP PIN program in 2022.

But I haven't seen any announcement of how to do that, yet.

Better late than never?  The FAQ on IP PINs changed recently:

https://www.irs.gov/identity-theft-fraud-scams/frequently-asked-questions-about-the-identity-protection-personal-identification-number-ip-pin#q22

Quote

Q22: Can I opt-out of the IP PIN program? (updated May 16, 2024)

A22: Yes, if you voluntarily joined the IP PIN program and have not been a victim of tax-related identity theft, then you may opt-out of the IP PIN program. To find out if you are eligible to opt-out, please log into your online account.

Yup, but an ATIN is only good for ODC and CDCC, not CTC or EIC.

And it was good for the Recovery Rebate Credit, which I forgot about.

But the RRC also required that the SSN or ATIN be issued (or at least applied for) by the due date, so amending won't get you that either.

Note that the PATH act of 2015 changed the law so that one cannot use an SSN or ITIN obtained after the filing deadline to claim credits such as EITC, CTC or ODC, so there may not be any benefit to filing an amended return.

From Schedule 8812 instructions and Form 1040 instructions (for EIC) 

Quote

If you have a qualifying child who does not have the required SSN, you can’t use the child to claim the CTC or ACTC on either your original or an amended 2023 return. The required SSN is one that is valid for employment and is issued before the due date of your 2023 return (including extensions).

........

If you have a dependent who does not have an SSN, ITIN, or ATIN issued on or before the due date of your 2023 return (including extensions), you can’t use that dependent to claim the ODC on either your original or an amended 2023 return.

.........

 If a child didn't have an SSN issued on or before the due date of your return (including extensions), you can't count that child as a qualifying child in figuring the amount of the EIC on your original or an amended 2023 return.

I would look at Form 8995-A, Schedule D.

The proposed regulations are here: https://www.federalregister.gov/documents/2020/06/10/2020-12213/certain-medical-care-arrangements, but indicate that they take affect when finalized.  I also don't believe they have been finalized.

Reimbursements of actual expenses are not taxable.  You'll get a 1099-LTC with Box 3 indicating that the amounts were reimbursed expenses.  You'll file Form 8853 showing nothing is taxable.

But if they are paid on a per diem basis, Box 3 will indicate per diem and any amounts in excess of the actual expenses OR an excluded minimum are taxable.  The excluded amount changes each year and can go up or down ($390 for 2022, $420 for 2023, $410 for 2024).   So if the actual expenses amounted to $300/day for 2023, they would only have to pay taxes on payments in excess of $420/day.   If actual expenses amounted to $500/day, the excluded amount is irrelevant and they pay taxes on payments in excess of $500/day.  (You look at the totals, not the actual per day expenses)

Accelerated death benefits from life insurance are reported in Box 2, but are not taxable if terminally ill (otherwise, they are treated as Box 1 amounts and are only taxable to the extent they exceed expenses or the excluded amount).

From the instructions, Form 1310 with Box B checked is only required for an amended return, not the original return:

Quote

Check the box on line B only if you are the decedent’s court-appointed or certified personal representative claiming a refund for the decedent on Form 1040X  ... or Form 843 ...

Certainly, if the student isn't required to file.  If the student will have to file, you have to look at the phaseout range of the AOC (above 160K MFJ, 80K other).  At some point above that, the benefit to the parent will be offset by the cost to the student.

Also note that the first $2000 of expenses generates a 100% credit, but the next $2000 only 25% credit, so a combined marginal rate above 25% for the student would make it not worthwhile to claim more than $2000.

Yes, and the earnings are prorated.  See Pub. 970, chapter 7 for the calculation.

It's not really a safe harbor - for off-campus housing it's also the maximum - students living in a lavish penthouse cannot use the full actual costs, only the COA allowance.  (For on-campus housing, you can use actual costs, if higher.)

See https://www.law.cornell.edu/uscode/text/26/529#e_3_B_ii

Quote

The amount treated as qualified higher education expenses by reason of clause (i) shall not exceed—

(I)the allowance (applicable to the student) for room and board included in the cost of attendance (as defined in section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll), as in effect on the date of the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001) as determined by the eligible educational institution for such period, or

(II)if greater, the actual invoice amount the student residing in housing owned or operated by the eligible educational institution is charged by such institution for room and board costs for such period.

Yes, taxable scholarships count as unearned income for the kiddie tax, so if unearned income is more than $2,500 and they are otherwise subject to the kiddie tax, they have to file Form 8615 - but only if they are required to file.

For example, a student who is a dependent (so they cannot claim AOC for themselves), and has only scholarship income, would not have to file unless the scholarship income is over $13,850.  But once they hit the filing requirement, any amount over $2,500 would require Form 8615.

Employers can make contributions to an employee's HSA, and employees can make pre-tax contributions through a cafeteria plan.  These are treated the same and both are reported as code W on Box 12 of the W-2 and will generally flow through automatically to the 8889 line 9 - no adjustment on the tax return can be taken for these.

If the employee makes additional (post-tax) contributions, they are reported on line 2 of Form 8889 and an adjustment may be taken.

Taxable scholarships count as earned income for purposes of the filing requirement, but once the filing requirement is met, they do not count as earned income for other purposes (such as EIC) - unless they are reported on a W-2.

Under the FAFSA Simplification Act of 2020, which went into effect for the 2023-2024 school year, schools are required to compute a Cost of Attendance (COA) for each category of student (broken down into components), and must publish these on their website (it was optional before, though many did publish it).
 
Note that schools may (but are not required to) adjust the published COA on a case-by-case basis for special or unusual circumstances, so the taxpayer may be able to obtain a different COA for their specific situation from the school (be sure to get it in writing).
 
Also, under the new law, the "room and board" component was renamed to "living expenses", which may also be listed as "food and housing".

Some courts have ruled that counting every individual wager that wins during a gambling session is unreasonable, as they are not really an accession to welath.  The IRS has proposed, first through Chief Counsel Advice Memorandum 2008-011 Reporting of Wagering Gains and Losses (https://www.irs.gov/pub/irs-utl/am2008011.pdf) and later in Notice 2015-21, a safe harbor for netting certain winnings and losses on a "session" (or daily) basis. 

This is likely what the previous preparer is relying on. However, the proposals were never finalized or put into effect (and applied only to slot machines), so you use them at your own risk.  I'm curious if anyone here is relying on them?

Sch. 1, line 8r is specifically for taxable scholarships and grants.  It no longer goes on Form 1040 line 1 as that is for earned income only.

It's probably too late to call, but they can try.

https://www.irs.gov/faqs/irs-procedures/refund-inquiries/refund-inquiries-18

Quote

If the return hasn't already posted to our system, you can ask us to stop the direct deposit. You may call us toll-free at 800-829-1040, M - F, 7 a.m. - 7 p.m.

I think it depends on what the fees are for.  "Concierge" fees which simply provide access (quicker appointments, a direct phone number, etc.), but where the medical care is billed separately in addition to the fee, are not considered to be for medical care and are not deductible.

But "Direct primary care" generally means the fees include medical care, so they are likely deductible.  The IRS has proposed regulations (REG-109755-19) which if finalized, would indicate when they are deductible, but I don't think they have been finalized.

Quote

The proposed regulations define a “direct primary care arrangement” as a contract between an individual and one or more primary care physicians under which the physician or physicians agree to provide medical care (as defined in section 213(d)(1)(A)) for a fixed annual or periodic fee without billing a third party.

Look up qualifying models here: https://fueleconomy.gov/feg/tax2023.shtml

But not every vehicle qualifies (even of the same model).  For example, MSRP must be <= $55,000 for sedans.

They don't actually have to use the distribution for medical expenses.  There is not even a requirement that they take the distribution before paying the expenses. They simply have to have expenses that qualify for the medical deduction in excess of 7.5% of AGI (whether or not they itemize).  So you can count all qualifying expenses, deduct 7.5% of AGI, and claim the remainder on Form 5329.

What is his residency or visa status?

Perhaps see: https://www.irs.gov/individuals/international-taxpayers/employees-of-foreign-governments-or-international-organizations

You should read it all, but highlights are:

Quote

Many agreements that establish international organizations contain a provision that may exempt your compensation from U.S. income tax. If you are employed by an international organization in the United States, first look to see if the international agreement establishing the international organization you are employed by has such a provision and whether you qualify under it. Generally, these provisions will not exempt compensation of U.S. citizen and resident alien employees.

...

If the international agreement creating the international organization you are employed by does not contain a tax exemption provision and you are not a U.S. citizen (or if you are a U.S. citizen but also a citizen of the Republic of the Philippines), you may be able to exempt your compensation under U.S. tax law. To claim the exemption, you must be able to demonstrate that you meet the requirements of U.S. tax law. ...

Continue reading the instructions.  There are two parts to 199A income which are computed separately (for carryforward purposes):

• Qualified Business Income (which excludes PTPs)
• Qualified REIT dividends and Qualified PTP Income/Loss

From the code:

Quote

The term “building envelope component” means—

(A)any insulation material or system, including air sealing material or system, which is specifically and primarily designed to reduce the heat loss or gain of a dwelling unit when installed in or on such dwelling unit,

(B)exterior windows (including skylights), and

(C)exterior doors.

Windows and doors must meet specific energy star requirements, so generally only the more expensive ones qualify.

"Insulation" has the least requirements (must meet IEEC standards) and manufacturers are claiming that things like window shades qualify, but from the instructions for Form 5695:

Quote

A component isn't specifically and primarily designed to reduce the heat loss or gain of your home if it provides
structural support or a finished surface (such as drywall or siding) or its principal purpose is to serve any function unrelated to the reduction of heat loss or gain.

 So I think you are out of luck.

They are not eligible for AOTC if they already had their first 4-year degree at the beginning of the tax year (the number of years they actually took to obtain it doesn't matter).

There would only be 8K of income if they do not claim a credit and the scholarships could be used to pay tuition and other qualified expenses. You subtract all qualified expenses from the scholarship to get the taxable amount. There would only be 34K of income if the scholarship may ONLY be used for living expenses and CANNOT be used to pay tuition, etc., which is rare.

If they claim LLC, they would have to allocate more of the scholarship to living expenses, increasing the amount of income, to get the credit.  But there would be no reason to allocate more than another 10K or 18K total , so 18K would be the maximum taxable (again assuming the scholarship allows either - and you have to make sure they actually had that amount of living expenses before allocating it thus).

Claiming the LLC may or may not be beneficial, depending on income.  Since LLC is not refundable, they would have to have enough other income to take full advantage of the credit, but the marginal rate would have to be less than 20% (since the LLC is a 20% credit).

One does not have to be in a degree program to claim the LLC, but if not, the courses must be taken "to acquire or improve job skills".

I think the "collapse" in housing has little to do with taxes and everything to do with interest rates.  No one wants to give up a 3-4% mortgage unless they have to.  On the other hand, those complaining about 7% rates must not remember the 80's when rates were 13% or more.

As for tax items not adjusted for inflation, we have the $300/$600 election for the foreign tax credit.