TexTaxToo

And Form 1040-V (payment voucher) now contains this notice:

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Notice to taxpayers presenting checks. When you provide a check as payment, you authorize us either to use information from your check to make a one-time electronic fund transfer from your account or to process the payment as a check transaction. When we use information from your check to make an electronic fund transfer, funds may be withdrawn from your account as soon as the same day we receive your payment, and you will not receive your check back from your financial institution.

On 8/30/2023 at 7:57 PM, Sara EA said:

I use a small community bank, and even there all I have to do is click on the check number and up pops images of the front and back of the check.  Have your clients tried that?

My experience is that Treasury does not send checks through the system - they get converted to an electronic withdrawal - many other businesses do the same.  So the bank never sees the check and cannot provide an image.  There should still be a bank reference number.

https://www.irs.gov/newsroom/irs-launches-paperless-processing-initiative

You can find a list of contacts for all states here:  https://missingmoney.com/app/state-index 

See Pub 559

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Form 1310 doesn't have to be filed if:

You are a court-appointed or certified personal representative filing the decedent’s original return and a copy of the court certificate showing your appointment is attached to the return.

Death certificate. When filing the decedent's final income tax return, don't attach the death certificate or other proof of death to the final return. Instead, keep it for your records and provide it if requested.

If the amount the brother would inherit is substantial and would be subject to the gift tax if he gave it to the mother, they should look into disclaiming the inheritance to avoid the gift tax.  This must be done in writing within 9 months (see https://www.law.cornell.edu/uscode/text/26/2518)

Used vehicle credit can be taken only on first resale of a vehicle (VIN must be included on return) and is limited to $4000.  Only for sale by a dealer of a vehicle at least 2 years old (by model year) at a price less than $25k.  So maximum of two credits per vehicle, one new and one used.

19 hours ago, DBerg said:

Here is what I found in the 4163, for IRS it is 10 Calendar days for returns and 5 Calendar days for extensions.

10 days is for business returns.  The corresponding period for individual returns (5 days) is in Pub 4164 (section 1.4.2):

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The following transmission dates pertain to individual returns:
• April 23, 2023 – Last day for retransmitting rejected timely filed Form 1040 family returns (Form 1040-NR with effectively connected income)
• June 20, 2023 – Last day for retransmitting rejected timely filed Form 1040 family returns (Form 1040-NR with non-effectively connected income) and/or Form 4868 extensions to meet overseas exception and Form 2350
• October 21, 2023 – Last day for retransmitting rejected timely filed Form 1040 family returns (Form 1040-NR with effectively connected income) on extension from Form 4868

I believe the option to use the FMV at 6 months after death only applies to the estate tax.  For the step-up in basis for capital gains, you must use the FMV at the time of death.  As Tom said, you can probably get away with using the sales price if the sale happens soon after death, but there is nothing in the law that allows that.

19 hours ago, jklcpa said:

Wasn't there a discussion recently about non-CA preparers being considered as doing business in CA if preparing CA returns and needing to pay some exorbitant fee, somewhere around $600?

Here's a summary of the Bindley decision for sole proprietors:

https://www.jdsupra.com/post/contentViewerEmbed.aspx?fid=5627083b-2aaf-4917-bfcf-5c56d1daa368

This may be the topic you remember:  

There's an exception if you fall out on the low end, that is, if you don't qualify because income is less than 100% FPL and you should be on Medicaid, but you thought you would qualify when you applied.

There's no exception on the high end, except for the limit on payback when < 400% FPL

Normally, the last 4 digits of the SSN of the dependent are provided as additional information for the reject.

2019 was the first year for which an amended return could be e-filed, but they follow the same rule as the 1040 that only the latest three years can be efiled, so 2019 has now rolled off and only 2020,2021,2022 amendments can be efiled.

Some software now has a checkbox to automatically include an "ACA explanation" pdf.

P.S. The reject code also applies if any dependent had marketplace insurance (no matter who applied for it or received the 1095-A).  If this applies, the dependent's 1095-A must be obtained and reconciled on the return.

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You can check the boxes for “Your spouse” if your filing status is married filing separately and your spouse had no income, isn't filing a return, and can't be claimed as a dependent on another person's tax return

I've never done this, so not sure what is required - Did you include the spouse name and SSN on the return?

https://www.irs.gov/publications/p547#en_US_2021_publink100071819

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The disaster year is the tax year in which you sustained the loss attributable to a federally declared disaster. Generally, a disaster loss is sustained in the year the disaster occurred. However, a disaster loss may also be sustained in a year after the disaster occurred. For example, if a claim for reimbursement exists for which there is a reasonable prospect of recovery, no part of the loss for which reimbursement may be received is sustained until it can be ascertained with reasonable certainty whether you will be reimbursed.

Pub 547 continues to include the special rules for qualified 2017 disasters since it is still possible to sustain a loss in 2022.

Most financial institutions that have 529 accounts allow anyone to open a 529 account for any beneficiary.  The person who opens and controls the account is usually referred to as the "account owner".  This has caused some confusion, since the law itself makes no provision for an "account owner" who is not the designated beneficiary. 

If Box 6 on the 1099-Q is NOT checked, then the recipient is the beneficiary and you are correct that it should match the 1098-T.  

But if Box 6 is checked, the recipient is the account owner who is not the designated beneficiary.   But the proceeds must still be used for qualified expenses of the designated beneficiary to be tax-free.

16 hours ago, cbslee said:

The name and ssn on the 1098 T and the 1099 Q need to match.

Not sure that's true.  From the 1099-Q instructions:

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QTP: List the designated beneficiary as the recipient only if the distribution is made (a) directly to the designated beneficiary, or (b) to an eligible educational institution for the benefit of the designated beneficiary. Otherwise, list the account owner as the recipient of the distribution.

Box 6 should tell you if the recipient is the designated beneficiary.

2 hours ago, cbslee said:

As long as the mother used the distribution to pay her daughters qualified education expenses

That's assuming the daughter is the designated beneficiary.  If the mother is the beneficiary, you cannot use the distribution to pay someone else's expenses (the exception now is that up to $10,000 can be used to pay off a student loan of a sibling of the beneficiary).

The mother could have changed the beneficiary to the daughter before withdrawing the money.  I don't know if it is possible to fix it after the fact.

Dividends are only qualified if the underlying security is held for 61 days during the 121-day period surrounding the dividend date.  Preparers of Form 1099-DIV are allowed to include dividends as qualified in Box 1b for which it is impractical to determine if the holding period has been met.  The instructions for Form 1040 say that you must exclude any dividends reported in Box 1b if the security was not held for 61 days (see here).

I suspect that very few people are diligent about doing so.

Does the 30% commission count as a gift, too? 

From the Supreme Court ruling on gifts in  Commissioner v. Duberstein:

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Moreover, the Bogardus case itself makes it plain that the donor's characterization of his action is not determinative—that there must be an objective inquiry as to whether what is called a gift amounts to it in reality. ... It scarcely needs adding that the parties' expectations or hopes as to the tax treatment of their conduct in themselves have nothing to do with the matter.

Taxable scholarships count as earned income for the standard deduction and for meeting the filing requirement.  Once there is a filing requirement, they do not count as earned income for anything else.

Has anyone received a reject for an invalid business code, or is it just the software not allowing it?

The IRS says 999999 will still be accepted (at least for TY22 on F1040):

https://www.irs.gov/forms-pubs/update-to-principal-business-activity-code-2022-instructions-for-schedule-c-form-1040

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As of January 25, 2023, the Instructions for Schedule C (Form 1040) have been revised to provide the updated principal business activity code for an unclassified establishment. The code has changed from 999999 to 999000. Individual filers can use either 999999 or 999000. Business filers must use 999000.

Yes, but only to the extent there was a tax benefit.  See Worksheet 2 and the discussion of "Itemized Deduction Recoveries" in Pub 525.

It's not clear how it should be reported.  It is earned income which should count toward EIC, but since no self-employment tax is due, the only way (according to the instructions this year) for it to carry to the EIC Worksheet is to include it in line 1z of the 1040 - perhaps on line 1h?

On 2/17/2023 at 4:26 PM, Max W said:

Just enter the max amount below 1116 threshhold - $600. 

That's not allowed.  If the foreign tax withheld is only slightly over $600, it's entirely possible that the credit allowed this year will be less than $600, with the excess needing to be carried back or forward.