TexTaxToo

A scholarship received by a child who is a student isn't taken into account in determining whether the child provided more than half of his or her own support.  (See Pub. 501 or code section 152(f)(5))

However, watch out for the kiddie tax.  The $13,000 is considered unearned income for purposes of the kiddie tax, so child's return would need Form 8615 if it is all taxable.

And today, 26 pages:

https://www.irs.gov/pub/newsroom/fs-2022-07.pdf

Last year, I received such a letter saying they needed another 60 days.  I got it about 4 months after my initial response.  They did respond and resolve the issue after another 4 months.  Patience.

I don't see any specific residency requirement for RRC (as long as they meet the normal requirements needed to file a 1040 and claim dependents).  Citizens living abroad would qualify.

The 6-month requirement is for refundable CTC, but only requires one spouse to be resident in the U.S., so they would qualify for that as well.

Brokerages are now required to ask for a "trusted contact" when an account is opened.  (It is not mandatory that the client provide one.)

https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-30

The phone number for EIP trace is different.  Fax numbers can be found here: https://www.irs.gov/newsroom/questions-and-answers-about-the-third-economic-impact-payment-topic-j-payment-issued-but-lost-stolen-destroyed-or-not-received#howdoitrack

Quote

To start a payment trace:
• Call us at 800-919-9835
• Mail or fax a completed Form 3911, Taxpayer Statement Regarding Refund PDF.
Reminder: DO NOT request a trace prior to the timeframes above. IRS assistors cannot start a trace prior to those timeframes.
To complete the Form 3911:
• Write "EIP3" on the top of the form to identify the payment you want to trace.
• Complete the form answering all refund questions as they relate to your Economic Impact Payment.
• When completing item 7 under Section 1:
o Check the box for "Individual" as the Type of return
o Enter "2021" as the Tax Period
o Do not write anything for the Date Filed
• Sign the form. If you file married filing joint, both spouses must sign the form.
You will generally receive a response 6 weeks after we receive your request for a payment trace, but there may be delays due to limited staffing. Get up-to-date status on affected IRS operations and services. Do not mail Form 3911 if you have already requested a trace by phone.

In this case, tiebreakers do not come into play unless they both claim the child on their returns.  In any case, I don't think vacations would affect anything as they are considered temporary absences as far as residency is concerned.

1 hour ago, Abby Normal said:

If the IRS just scans all paper returns received,

Do they?  In the Taxpayer Advocate's report to Congress last week, the first recommendation was:

Quote

Utilize scanning technology and reduce barriers to e-filing. The IRS could reduce its backlog of paper tax returns by using scanning technology to machine read returns, as many state tax agencies have been doing for more than ten years. ... These Taxpayer Advocate Service (TAS) recommendations would reduce the need for IRS employees to manually transcribe the data from paper returns – the primary cause of the backlog and of transcription errors that led to math error notices and refund delays...

20 hours ago, kathyc2 said:

Well, I may have misspoke.  I remember after SECURE act came out, there was talk of this.  https://www.kiplinger.com/article/retirement/t054-c000-s004-secure-act-changes-squeeze-qcds.html

However, when I test it in my software, it excludes the full 25K and then deducts 7K for IRA.  Also, I'm not finding any mention of it in 590B.  

So, who knows!

You are correct - it's in the law.  You must reduce QCDs by any IRA contributions made after 70 1/2 (it is cumulative - not just this year's contributions).  The recently released draft 590B has a confusing worksheet for QCDs that is not well explained.  It's not surprising that it's not yet implemented in the software.

26 minutes ago, Gail in Virginia said:

My understanding was that the tie-breaker rules only applied if both parents claimed the child, or if no parent claimed the child. 

I agree.  There are plenty of examples in Pub 501, starting on page 15.  mcb39 should look at example 8.

18 hours ago, Lion EA said:

A tie-breaker rule comes into play when two taxpayers claim the same child. When all the taxpayers agree on the child's dependency, there is no tie.

That is mostly true.  But a non-parent (like a grandparent) can only claim a child if their AGI is higher than any other person (including a parent) who qualifies to claim the child.  It doesn't matter if the others agree, it's not allowed if the non-parent's AGI is lower.  (Between parents, they can agree to let the lower AGI parent claim the child.)

16 hours ago, Christian said:

He claims HOH and claims his son and she claims a son from her former husband and files HOH.

Under 2017 proposed regulations, what they are doing is allowed, under the concept of multiple households sharing living quarters.  The rule is that to claim HOH, dependents must be in the household of the person who would win the tiebreaker.  So its only allowed in cases like yours where there is a child of a former spouse.  She could not be HOH based on claiming a shared child (e.g., if they split two of their own children), since he would win the tiebreaker (assuming he has the higher AGI).

https://www.federalregister.gov/documents/2017/01/19/2017-01056/definition-of-dependent

1 hour ago, Pacun said:

SE tax is higher than EIC at any level if there are no children. 

Well, it is close this year.  For example, a single person with $10,000 self-employment income would owe $1413 in SE tax and get $1419 in EIC for a refund of $6.

The "optimum" to get the maximum EIC of $1502 would require income of $10,545 with SE tax of $1490, and a refund of $12.  Much income above that and the SE tax is higher.  But anything lower, and the EIC would (just barely) cover the SE tax.

The IRS will only accept e-files for the current year and the two prior years.  So 2019, 2020, and 2021 at the most.

Several senators wrote to the IRS last week questioning the legality of the service:

https://www.cassidy.senate.gov/newsroom/press-releases/cassidy-colleagues-urge-irs-to-investigate-enqs-pay-for-service-scheme

Quote

It is curious that in the time period since EnQ’s robo-calls began flooding the IRS lines, the downward trend in calls answered at the IRS increased so dramatically. As such, we ask that you evaluate whether EnQ has negatively impacted the capacity of your phone systems. If it has, we ask that you consider all potentially applicable remedies, including 26 U.S. Code §?7212, which prohibits attempts to interfere with administration of internal revenue laws. Being able to call the IRS is a free, public service that should be available on an equal basis. Paying to receive preferential access to the IRS should not be permitted. 

The current incarnation of the Build Back Better Act would extend the CTC changes to 2022, but that is far from law at this time.

There is a difference between e-filing and direct deposit/pay.  You can e-file and still pay by mail.

Of course, if you send them a check, they still have your account information.  Ask them how they are paying.  Maybe they want to take cash to a local IRS office??

Yes, you can treat the withholding as having been paid in four equal installments corresponding to the four "quarterly" periods.

Note that you do have the option of treating withholding as being paid when actually withheld (see box D in part II of Form 2210).  This can be beneficial, for instance, if the RMD was taken earlier in the year, and spreading it out would result in underwithholding for that period.

Actually, 2019 can be used again in 2021.  But 2020 cannot be used in 2021.

So for 2021, you can use 2019 earned income to calculate EIC if it is higher than 2021 earned income and if doing so is beneficial (you don't have to use it).

12 hours ago, Sara EA said:

If your client had told you about this before May 17, s/he could have withdrawn the contribution and then made a traditional IRA contribution and done the back door.  Too late now. 

You are allowed an automatic 6-month extension to recharacterize or withdraw if you timely file.  For this and other rules, see:

https://www.irs.gov/publications/p590a#en_US_2020_publink1000230693

It is too late to make a new contribution for last year.  The conversion can be done anytime.

You can convert from TIRA to Roth as often as you like.  Once done, you cannot undo (or recharacterize) a conversion.  If you have ever made tax-deductible contributions to the TIRA, you must pay tax on a portion of the amount converted (in proportion to the amount of tax-deductible contributions).

You can recharacterize only regular contributions made during the tax year, NOT conversions or rollovers.  The contribution must be moved (recharacterized) by the due date of the tax return (including extensions) for that year.  Can you recharacterize a contribution multiple times?   I'm not sure - I don't see anything prohibiting it if done before the due date and the trustee is willing to do it.  But if you ever called it a conversion, then no.

You can also simply withdraw any contribution made during the tax year by the due date (you must also withdraw any income due to the contribution and pay tax on it).

No criticism intended!  The point is just clarification that the number of returns under manual review was only 780,000 - not the entire 8.5 million backlog.  Even so, it will take the rest of the year to clear them.

20 hours ago, cbslee said:

which are now all returns which will require manual intervention.

I don't think that's correct.  Current status of the backlog is available here:

https://www.irs.gov/newsroom/irs-operations-during-covid-19-mission-critical-functions-continue

which is where the 8.5M number came from.  Further details were communicated here:

https://www.irs.gov/pub/irs-utl/operationsstatus.pdf

Highlights:

Quote

As of early September, the IRS has processed all error-free paper and electronically filed individual tax returns received prior to April 2021. We continue to reduce the inventory of the remaining individual tax returns by about a million a week even as more tax year 2020 returns continue coming in prior to the Oct. 15 extension deadline. For tax returns that need additional manual review, we’re on target to being back to our normal processing pace by the end of 2021.

From January 1 through August 11, 2021, the IRS manually made about 11 million math error corrections, around 9.1 million of which were related to the RRC. By comparison, for the same time in 2020, the IRS had far fewer tax returns with issues; under nearly 1 million math error corrections occurred during that time period.

As of September 4, 2021, the IRS had 780,000 individual returns in manual review

 

Sara, the only point of annualization is to avoid penalties for underpayment of estimated tax.  If the cost of preparing the form is more than the penalty, you're right.

Christian, what deductions are you talking about?  As Margaret said, pretend that the period is a 'year' and you are preparing a return for that 'year'.  What deductions would you include?  If you are cash basis, only things that you actually paid during the period.  There might be a few things such as the sales tax deduction from the tables where prorating makes sense, but for most things, it is when they were paid.

15 hours ago, Christian said:

I don't fully understand if you use the full amount of deductions on line 1

Line 1 contains only income, expenses, adjustments for the partial year only.  That is, items which were received or paid during that period.  Similarly, line 4 contains only deductions paid during that period.  The column periods are not quarters, they are year-to-date.

These are then annualized so everything after line 6 is based on the full year (as if their AGI for the year was the amount in line 3).  Nothing gets divided by 4.

The annualized self-employment tax is calculated separately in Part II.