kathyc2

This morning I had contact with two prior clients.  They were both PITA so I didn't care when they left.  One was absolutely indignant when I passed on taking her back as a client.  LOL! 

3 hours ago, Abby Normal said:

The worst is records from a smokers house. Smells awful and it makes me sneeze. Fortunately, there aren't many of those anymore. Also, I never see the hard copies of the records, just a PDF, so someone else has to deal with smelly records.

The ones that smell like they were soaked in perfume/cologne are just as bad. 

2 hours ago, TexTaxToo said:

Money is fungible.  It doesn't matter what she actually used the distribution for.  If she had qualified higher education expenses in the same year as the distribution, the penalty is waived for the amount of the distribution up to the amount of the expenses.

Wouldn't it only apply to money that was actually paid?  In other words, if student loans were taken out, I don't think that amount would qualify. 

Correct. She is responsible for the remaining payback. See 5405 instructions.

7 minutes ago, jklcpa said:

What I was answering, and I think what DaveT was asking, is that the Spring 2023 tuition may be prepaid in 2022 and used as part of the AOTC for the 2022 tax year, which would encompass both the 4th academic year AND the 4th and final tax year for the AOTC.  In this scenario, there is no 5th tax year involved.  I think that is DaveT's latest question.  Do you know why that would not work? 

The AOC is only good for the first 4,000 of tuition/fees.  If they already have that much, I'd pay the Spring in 2023 to at least get some Lifetime Credit if the AOC has already been used 4 years. 

If the student files on their own for the non-refundable portion, their income would need to be over 17,550 to see any net tax benefit.  After standard deduction, 17550 earned income would have $500 tax offset by the non-refundable AOC.  Mom loses the $500 other dependent credit, so break even.

Also, it money Mom took from retirement was an IRA, see if it can be exempt from 10% penalty for higher education expenses. 

14 minutes ago, Margaret CPA in OH said:

Not have claimed the AOTC or the former Hope credit for more than four tax years

I think you misunderstood me.  I was pointing out that while it can only be used on 4 tax returns, there may be multiple years available to choose which are the "best" 4 years. 

1 hour ago, jklcpa said:

This is a good point, but also remember that, not only is it available for only 4 tax years, the AOTC is also only available for the first 4 years of postsecondary curriculum, as determined by the educational institution, generally the freshman through senior years.

 

That will be over 5 calendar years though, as the student almost always starts in fall.  In actuality, it can run over several calendar years as the requirement is "at least 1/2 time". 

I have the plastic sleeve client, several don't open envelopes, a couple staple happy ones, some that use a box of paper clips and one that puts sticky notes on everything.  Like I need a sticky note to tell me a W2 is a W2.

2 hours ago, Randall said:

I'm not seeing this on the 8812 and worksheets.

Part III of 8812

23 minutes ago, Lion EA said:

 Start the SOL. So many reasons to file.

LOL!  I don't think seniors that have Social Security and a couple hundred of interest income need to worry about SOL.  No reason to pay me to prepare a return that is not required or offers them zero benefit.

13 hours ago, Lion EA said:

Filing starts the SOL running. Why would you not file?

I have a lot of senior clients with AGI below the standard deduction.  The only reason I still file for them is that IN has such a low filing threshold. 

2 hours ago, Randall said:

A recent WSJ article talked about higher probably of divorce due to age of marriage and cohabiting before marriage (especially mulitple partner cohabiting).  Whew.  Younger age and never cohabiting resulting is less divorce.  Older marriage age and cohabiting (with spouse) or having multiple other pre-marriage cohabiting partners resulted in higher divorce rates.

 

I'm guessing there is a strong correlation the family/religion/community that frown on cohabitation also frown on divorce. 

As long at it was oversight and missing distribution is taken before filing return, they won't assess the penalty.  From 5329 instructions:

Waiver of tax for reasonable cause.

The IRS can waive part or all of this tax if you can show that any shortfall in the amount of distributions was due to reasonable error and you are taking reasonable steps to remedy the shortfall. If you believe you qualify for this relief, attach a statement of explanation and file Form 5329 as follows.

Complete lines 52 and 53 as instructed.

Enter “RC” and the amount of the shortfall you want waived in parentheses on the dotted line next to line 54. Subtract this amount from the total shortfall you figured without regard to the waiver, and enter the result on line 54.

Complete line 55 as instructed. You must pay any tax due that is reported on line 55.

The IRS will review the information you provide and decide whether to grant your request for a waiver. If your request is not granted, the IRS will notify you regarding any additional tax you may owe on the shortfall.

I'm guessing you are referring to accrual basis taxpayers needing to actually pay out accrued expenses in the first 2 1/2 months of next year?

If it make the most sense to report it on Corp return, then I'd put it on 1040 Sch1 line 8c and also negative amount with short explanation on line 8z

I'm assuming you checked if there is any exclusion due to insolvency?

Are you sure the loan docs have it as guarantor instead of co-signer?

That's what I figured.  I just wanted to make sure there wasn't some trick I wasn't aware of.

The bank handled it correctly. See if Pub 4681 answers your questions for your particular circumstance.

6 minutes ago, Randall said:

Off the top of my head, I would say yes.  But you may contact the employer and request they reimburse the estate for the income tax withheld so the W2 will show zero tax withheld.

|That's a good idea.  However, it's from a monthly IRA payment and he also had withholding on SS benefits. 

Unmarried client passed in Jan 2022.  He would have had some withholding for 2022.  Do I need to wait until 2023 to file a claim for it with a 1040?

It depends on her income.  If it's less than 40K, no payback.  If between 40 and 80K, partial payback.  Over 80K all needs to be paid back.

Does anyone have a link that summarizes which of the changes are for 2021 only?

You can only use it if 2019 income is higher than 2021.

I'm thinking the over 65 is just for 2021 unless they pass additional legislation. 

Abby, the RSC wouldn't apply as to get EIC,AGI is already below the standard deduction.