kathyc2

You don't have to disclose any financial info to let someone know. If you have a relationship with children or someone else close to them, it can be as simple as saying something like "I noticed your Mom isn't as organized with her information as she used to be."

I believe that only applies to self prepared returns. I vaguely remember eons ago, we had to enter that. But, pros haven't needed to do so for at least a decade.

I included the IRS definition of virtual currency straight from the 1040 instructions with my letter. That puts onus on client that they need to tell me to check box or not. https://www.irs.gov/instructions/i1040gi#en_US_2021_publink100061442

How about calculating pro forma returns? Two for each; one where they claim child and one where they don't. Hopefully, they can then agree which return should have the child on it.

QCD's are only available from Traditional IRA's, so in that respect it makes sense. Between IRA's, 401k, 403b, etc there are probably a dozen different ones. All similar but each with it's own quirks. It's been a pet peeve of mine for quite some time. If they want to simplify taxes, I wish they would start here and stop messing with changing where things are at on forms.

It depends. Use the 250K amount in traditional IRA's. Say it's in good mutual funds earning 7% on average. The RMD percentage does not reach 7% withdrawal requirement until age 87. That means if the person only takes RMD, the IRA will keep growing until age 87, which using these numbers will be in the 342K vicinity. If the owner dies without a spouse at age 87, thanks to SECURE eliminating stretch rules, the beneficiary will be taxed on this entire amount over a 5 year period. Doubtful that will still be $0 tax.

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!

Correct. However, the 7,000 taxable income will be offset by the 7,000 traditional deduction. Yes.

Roth's are awesome. Rarely does it make sense for someone in a 12% marginal bracket to contribute to a Traditional. Distributions will likely make more SS taxable, so a 12% marginal rate in retirement years will have an effective rate of 22.2% (12 x 1.85)

That doesn't work too well for those still wanting to make contributions after 70 1/2. The QCD is limited to the excess of amount contributed after 70 1/2. If someone puts 7K in a traditional, only the QCD over 7K qualifies for exclusion.

We're not there yet and a shortage of drivers contributed to all kinds of supply chain problems.

Well, for years I've been hearing the OTR drivers will not be needed and be extinct....

It took me much more than 30% longer in 2018 to figure out where things went on the stupid "postcard" return. Five years ago if asked when I would retire the answer was probably never. So much of what has happened, that is no longer true. It's just not fun anymore. Luckily for me I'm at an age and financial position that I don't have to put up with the problem clients. I feel I should keep doing returns for long term clients, friends and relatives as long as I can. It's sad, but when us old timers are gone, people will be in a bind. So much of what I see from the younger crowd is they rely 1000% on their tax software and can't seem to think beyond it. If you are only doing compliance, I guess that's okay. However, unless they understand how it all comes together they are at a loss of making recommendations.

The tie-breaker rules only come into play when 2 people try to claim the child and the IRS needs to make a determination as to which one gets it. If the parents agree which will claim, then tie-breaker rules do not apply.

I think you are conflating issues. The higher income only comes into play as a tie breaker when both parents try to claim the child. If both parents and one child all live together, then they need to decide which parent will take the child for CTC, HOH, EIC and dependent care. No splitting the benefits in this case. However, if the parents live separately, then the CTC can be broken off and go to the non-custodial parent. Also, if parents are unmarried but living together, and have more than one child, then each parent can claim one child for all the benefits if they wish. If the father (40K) claims then he could file HOH and all other benefits. It would be hard to justify mother (18K) as qualifying as HOH, so if she claims child, then both would file Single. The much higher EIC for 18K would more than offset the tax savings for father claiming HOH in this example by a couple thousand. I don't get Quickfinder, but are you sure it's not talking about tie-breaker rules in regard to higher income? I was thinking more of unmarried parents who do not live together in my OP. I try not to prepare returns for both parents in divorce situations.

Have the employer contact Paychex to void the W2's they produced.

Even with EIC and CTC seems like in total they would be paying more this way than if they were married and filed MFJ.

In this case there would not be a repayment of CTC, as her income is below 40K. https://www.irs.gov/credits-deductions/2021-child-tax-credit-and-advance-child-tax-credit-payments-topic-h-reconciling-your-advance-child-tax-credit-payments-on-your-2021-tax-return This is a hypothetical case. Years ago I would have had several clients that this would pertain to, but it seems as I've aged, so have my clients. I'm not sure I'll even run across a situation like this. If client was aware of this and wanted to change claiming of kids, I'd be okay with it as long as either qualify. I just don't think I'd feel comfortable going the extra step and suggesting it, but I'm curious as to other pros thoughts regarding it.

Say unmarried parents have a child under age 6. She claimed child in 2019 and 2020 so she received the 1,400 EIP and 1,800 advance CTC. Her income is under 40K. For 2021 she releases the exemption. He then claims the 1,400 EIP plus the 3,600 CTC. Is suggesting to do this unethical or good planning?

There could be many reasons. The monthly benefits will be less, but he will receive them for a longer length of time.

That is totally different that what you said in the first post. You said earned income; as in a job. There are a little different rules, but basically 457b is the same as a 401k. Would you say someone could withdraw from a 401k and receive SS benefits?

I assume the public service job was one that is not subject to SS tax? If so, it doesn't count as SS wages for the earning test. His SS benefits probably don't amount to much as they would be from other jobs (prior to public service, part time during, etc.) I assume the SE in your title was an error, and he is not planning on quitting the city and starting a business with self employed income. If he truly is looking at self employed income, they would be SS wages and benefits would be dinged after 19,560.

The penalty for underpayment is 3%. The interest paid on overpayments is 3%. Probably a little difference with timing, and the interest received will be taxable, but I certainly wouldn't be opening a can of worms by trying to return it for what will likely amount to less than $25.

Are you sure neither parent qualifies for HOH? Just because the kids "claimed" themselves, it doesn't mean that they should have. If either kid is full time student under age 24 and did not provide over 1/2 of their own support, HOH, education credits and even EIC may come into play.

Correct. Because there will always be basis in IRA, a calculation should always be done for how much of distribution is taxable for the rest of their lives.